Assume a Competitive Industry Produces Widgets Using Labor and Capital

Multiple Choice

Assume a competitive industry produces widgets using labor and capital in fixed proportions.Both input supply curves slope upward.The government considers the equilibrium price of widgets to be too high and imposes a price ceiling that is below the equilibrium price.Which of the following is most likely to occur?

A) The sales of widgets will increase and the prices and employment of both inputs will rise.
B) The sales of widgets will decline and the prices and employment of both inputs will remain unchanged.
C) The sales of widgets will decline and the prices and employment of both inputs will fall.
D) The sales of widgets will increase and the prices and employment of both inputs will fall.