You're correct. The pencil question is their signature gambit. When I interviewed at BB as a high schooler, I also answered this question incorrectly (but earnestly) and the hiring manager took pity on me, saying effectively "I like you, so I'll give you another chance. When the GM asks you this question you ALWAYS say 'stealing is wrong no matter what'".

You definitely dodged a bullet, btw! That job was my first lesson in corporate hell