Suppose That Pasta Is Produced Under Conditions of Perfect Competition

question 83

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.

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Definitions:

Myocardium

The muscular tissue of the heart that contracts to pump blood out of the heart and then relaxes as the heart refills with returning blood.

Endocardium

The innermost layer of the heart's walls, lining the chambers and heart valves.

Capillary Walls

The thin, semi-permeable barriers of capillaries that allow for the exchange of oxygen, nutrients, and waste products between the blood and tissues.

Filtration

A process of separating suspended particles from fluids, gases, or other substances by passing them through a filter.