The correct option is C Two people were arrested last night by the police.
The given sentence is in the active voice, as the subject 'The police' performs an action 'arrested' against the object 'two people'.
If this sentence is changed to passive voice, then the object takes the place of the subject and vice versa and the word
'by' is introduced as now the subject receives the action by the object.
The verb form of the sentence is also changed from active form to
passive.
'Subject (The police) + verb (arrested) + object (two people) + adverb (last night)' changes to:
'New subject (Two people) + verb (were arrested) + by + new object (the police)'
The
passive form of 'arrested' in the simple past tense is 'was/were arrested'.
This can be seen in option C, hence it's the right answer.
Option
A: The verb form 'have been arrested' expresses the present perfect tense whereas the sentence is in simple past tense 'arrested'.
Option B: In this option, 'are' expresses the simple present tense.
Option
D: The verb 'was' is singular and follows a singular subject. But, the subject 'two people' is plural. Hence a plural verb 'were' must follow. The verb and subject must agree in terms of number.
Hence options A, B and D are incorrect.