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In the past, a town has had only one movie theater, Theater A, which is located in a prominent building downtown. A new theater, Theater
In the past, a town has had only one movie theater, Theater A, which is located in a prominent building downtown. A new theater, Theater B, begins showing movies at an outdoor amphitheater where customers can picnic while they watch a movie. Theater A lowers its ticket price slightly in response. What will MOST likely happen to the theaters over time? Theater B will move to an indoor location to capture Theater A's customers. Each theater will continue to attract customers due to consumers' differentiated preferences. Theater A will be forced to exit the industry due to Theater B's low fixed costs. The theaters will engage in a price war until prices are driven down to marginal cost
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