An Appliance Manufacturer Adopts a New Technology That,ceteris Paribus,increases the Productivity

Multiple Choice

An appliance manufacturer adopts a new technology that,ceteris paribus,increases the productivity of capital.At the same time,its employees unionize and demand higher wages.Assume that for this manufacturer capital and labor are substitutable.Which of the following is most likely to occur?

A) Capital will be substituted for labor.
B) Labor will be substituted for capital.
C) Output increases as do the prices of capital and labor.
D) Output decreases as does the price of cars.