Microeconomics Quiz
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COMPETITIVE EQUILIBRIUM
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Two pizzerias, A and B, operate in a perfectly competitive market. Pizzeria A rents its oven for a high monthly fee but buys cheap ingredients (high fixed costs, low variable costs). Pizzeria B owns a simple, inexpensive oven but uses premium, costly ingredients (low fixed costs, high variable costs). The market price of pizza suddenly drops, causing both firms to operate at a loss. Which of the following is most likely to occur in the short run?
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