Suppose That Erasers and Pencils Are Complements

question 7

Multiple Choice

Suppose that erasers and pencils are complements. When the price of erasers increases and the supply of pencils remains unchanged, _____.

• A) the demand for pencils increases
• B) the quantity supplied of erasers decreases
• C) the equilibrium quantity of pencils decreases
• D) the equilibrium price of pencils increases

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Definitions:

Short-term Creditor

An entity or individual that lends money with the expectation of repayment within a short period, typically within a year.

Acid-test Ratio

A financial metric that measures a company's ability to pay its current liabilities with its most liquid assets, excluding inventory.

Asset Turnover

A measure of how efficiently a company uses its assets to generate sales; computed by dividing net sales by average total assets.

Price-earnings Ratio

A valuation metric for stocks, calculated by dividing the market price per share by the earnings per share.