Assume a Competitive Industry Produces Widgets Using Labor and Capital

question 14

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.

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Definitions:

Total Industry Sales

The aggregate revenue generated by all companies operating within a specific industry over a given time period.

Ben & Jerry's Sales

Refers to the revenue generated from the sale of Ben & Jerry's ice cream products, a subsidiary of Unilever known for its unique flavors and social activism.

Quantitative Value

A measurable, numerical value associated with data, which can be analyzed statistically for trends, patterns, or to gauge performance.

Marketing Activity

Any action or task carried out by a company to promote and sell its products or services, including advertising, sales, distribution, and market research.