# Pricing ATM machines

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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6-3

Marginal cost for transactions over 1000 ------ first 1000 transactions is zero.

Revenue ...

#### Solution Summary

This solution explains how to calculate an optimum price given a number a variables.