Final answer:
The firm is better off economically if the product is dropped.
Step-by-step explanation:
The statement is true. If a firm can avoid more in fixed costs than it loses in contribution margin by dropping a product, then the firm is better off economically if the product is dropped. This is because fixed costs are costs that do not vary with the level of production, while contribution margin represents the revenue that exceeds variable costs.
By dropping the product, the firm would not incur these fixed costs and would potentially save more money than it would lose in contribution margin.