Final answer:
The supply of a firm that can quickly adjust to changing prices is likely to have an elastic supply, where elasticity is greater than one, indicating a high level of responsiveness to price changes. The correct answer is option B) Elastic.
Step-by-step explanation:
When a firm demonstrates the ability to react quickly to changing prices, the nature of the supply is likely to be elastic. Elasticity of supply refers to the responsiveness of the quantity supplied to a change in price. An elastic supply indicates that the firm can adjust production levels more significantly in response to price changes. In other words, if prices increase or decrease, an elastic supplier would be able to change the quantity supplied at a greater than proportional rate.
In contrast, inelastic supply is characterized by a less than proportional response to changes in price, meaning that even with price variations, the quantity supplied doesn't change substantially. This indicates a low responsiveness of firms with inelastic supply when faced with price shifts. On the other hand, infinite or perfect elasticity represents an extreme situation where the quantity supplied changes by an infinite amount in response to any price change, with a completely horizontal supply curve.
Elasticity can be divided into three broad categories: elastic, inelastic, and unitary. A supply is considered elastic if the elasticity is greater than one, with a high responsiveness to price changes, whereas inelastic denotes an elasticity less than one with low responsiveness. The correct option for a firm that can quickly adapt its supply in response to price changes is B) Elastic.