The cost of capital for a firm, rWACC, in a zero tax environment is: A) equal to the expected EBIT divided by market value of the unlevered firm.
September 3, 2020
Suppose that Lisa’s utility derived from consuming Z units of pizza and B units of burrito is given by the following utility function:
September 3, 2020

I have a quistion regarding the below:

If the price of a complement for tires decreases, all else equal,

a.         quantity demanded for tires will decrease.

b.         quantity supplied for tires will decrease.

c.         demand for tires will increase.

d.         demand for tires will decrease.

e.         supply for tires will increase.

Answer: c

Q: I know that the Answer is C but I also know that that supply should decrease. So why isn’t “B” a correct answer as well?

Thank you,

KM
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