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:

A) higher price and a smaller quantity of pasta.
B) higher price and a greater quantity of pasta.
C) lower price and a greater quantity of pasta.
D) lower price and a smaller quantity of pasta.