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. After all long-run adjustments have occurred, we would expect total consumer spending on pasta to have:

A) risen.
B) fallen.
C) remained the same.
D) first fallen, then risen, then returned to the original level of expenditures.