From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on non-customers, who make $10 million in withdrawals from other banks' ATM machines. On average, non-customers earn a wage of $20 per hour and pay ATM fees of $2.75 per transaction. It is estimated that banks would be willing to maintain services for 4 million transactions at $0.75 per transaction, while non-customers would attempt to conduct 16 million transactions at that price. Estimates suggest that, for every 1 million gap between the desired and available transactions, a typical consumer will have to spend an extra minute traveling to another machine to withdraw cash.
Based on this information, what would be the non-pecuniary cost of legislation that would place a $0.75 cap on the fees banks can charge for non-customer transactions?
Instructions: Round your answer to the nearest penny (2 decimal places).
$
What would be the full economic price of this legislation?
$
Solution Preview
See the attached file. Note that equilibrium is where supply and demand curves intersect, without market interference. With the price ceiling, a shortage is created.
Non-pecuniary prices are based on non-monetary value to consumers of having to look for another machine. This is the value ...
Solution Summary
Graphing to determine the the economic and non-pecuniary cost of a price ceiling on the price of ATM transactions.
... In actuality, price ceilings often have the effect of raising the total cost of the good above ... This solution discusses the effect a price ceiling would have ...
... offer prices that can be lower than the price ceilings. ... policies because of the perverse effects that can ... Also, when the government sets price ceiling that are ...
... What are the effects of this price control on the ... for a particular good, while a price ceiling sets a ...Price ceilings are used in situations where it is felt ...
... the total cost of the good above the ceiling, and above the unrestricted equilibrium price. Price ceilings can actually have the opposite effect intended by ...
... Elaborate about how consumers are affected. Kindly see the attached file. Price Ceilings/Discrimination are highlighted. 1. Consider a price ceiling imposed on ...
... impact to the entrepreneurs affected by the ... of the government that the price ceiling that it ... When the government intervened through price ceilings, the economy ...
... because (1) it shifts our production to an efficient mix, (2) it creates inefficiently high prices on our ...Effects of subsidies & floors/ceilings are embedded ...
