Suppose That Pasta Is Produced Under Conditions of Perfect Competition

Multiple Choice

Suppose that pasta is produced under conditions of perfect competition and that the constant-cost industry is initially in long-run equilibrium. Now suppose there is an increase in the price of wheat, which is a key ingredient in producing pasta. Further assume that the price elasticity of demand for pasta is -1.8. In the short run, we would expect to see:

A) most firms in the industry earning positive economic profits.
B) most firms in the industry earning zero economic profits.
C) most firms in the industry earning negative economic profits.
D) not enough information is given to answer the question.