Pricing ATM machines
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6-3 Pricing ATM machines
A bank in a mediumsized Midwestern city, Firm X, currently charges$1 per transaction at it's ATM's. To determine whether to raise price, the bank managers experimented with a number of higher prices (in25-cent increments) at selected ATMs. The marginal cost of an ATM transaction is $0.50
ATM fee Usage
$2.00 1000
$1.75 1500
$1.50 2000
$1.25 2500
$1.00 3000
What ATM fee should the bank charge?
6.5 If elasticity is -2, price is $10, and marginal cost is $8, should you raise or lower price?
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Solution Summary
This solution explains how to calculate an optimum price given a number a variables.
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6-3
Marginal cost for transactions over 1000 ------ first 1000 transactions is zero.
Revenue ...
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