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    Charge Non Customer Assessments

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    3. You are an aide for the Senate Banking Committee Chairman. He comes to you with a bill that proposes setting limits on what ATM owners can charge nonaccount holders, over and above what banks charge their own customers. Currently, large banks charge noncustomers an average fee of $1.35 per transaction in addition to the fees the customer's own bank imposes. The Senator asks you to look at a proposal that would place a $0.50 cap on the fees ATM owners can charge noncustomer for accessing their money. If this legislation is enacted, what would be the likely effects?

    4. Recently, the Brazilian Association of Citrus Exports (Abecitrus) announced that orange production would be down 25 percent this year because of poor weather conditions, disease, and tree stress resulting from three straight bumper crops. What effect will the decreased production of oranges have on the demand for tomato juice? What would be effect on tomato juice price and quantity sold in the market? (Assume that tomato juice is a substitute for orange juice.)

    5. When the price of butter was "low," consumers spent $5 billion annually on its consumption. When the price doubled consumer expenditures increased to $7 billion. Recently you read that this means that the demand curve for butter is upward sloping. Do you agree? Explain.

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    Solution Preview

    3. The proposal is to apply a price ceiling. As a result there would be a shortage of ATMs, which would be equal to the difference between the quantity demanded and quantity supplied at the price ceiling. Hence, the full economic price paid for ATM usage would exceed the price paid for ATM usage. This would include the value of time lost in the transaction.
    4. The situation would lead to increase in the ...

    Solution Summary

    Charges for non customer assessments are examined. The consumer expenditures are examined.