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QUESTION 4.6 Your summer internship is with the strategy department of Chevy Chase Bank (CCB). They are considering changing the fee they charge to non-customers who use their automated teller machines (ATMs). CCB customers can use CCB ATMs without a fee. CCB conducted some market research and have found that when they raise their ATM fee, they actually increase the number of new checking account customers per day-the cross-price elasticity is positive. Non- customers get tired of paying the fee so they become customers. However, as you raise ATM fees you lose non-customer transactions at your ATMs. The non-customer demand for CCB ATM transactions is given by the equation Q = 19,000 - 6,000P. Right now CCB handles 10,000 non- customer ATM transactions per day at a fee of $1.50. a. What is the own-price elasticity for ATM fees charged to non-customers? N At the current ATM fee, should you raise or lower your ATM fees? Why? b. What should your new ATM fee be if your marginal cost of servicing an ATM transaction is $0 and you are only considering maximizing profits derived from ATM fees? N

QUESTION 4.6 Your summer internship is with the strategy department of Chevy Chase Bank (CCB). They are considering changing the fee they charge to non-customers who use their automated teller machines (ATMs). CCB customers can use CCB ATMs without a fee. CCB conducted some market research and have found that when they raise their ATM fee, they actually increase the number of new checking account customers per day-the cross-price elasticity is positive. Non- customers get tired of paying the fee so they become customers. However, as you raise ATM fees you lose non-customer transactions at your ATMs. The non-customer demand for CCB ATM transactions is given by the equation Q = 19,000 - 6,000P. Right now CCB handles 10,000 non- customer ATM transactions per day at a fee of $1.50. a. What is the own-price elasticity for ATM fees charged to non-customers? N At the current ATM fee, should you raise or lower your ATM fees? Why? b. What should your new ATM fee be if your marginal cost of servicing an ATM transaction is $0 and you are only considering maximizing profits derived from ATM fees? N

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 1CQ
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QUESTION 4.6 Your summer internship is with the strategy department of Chevy Chase Bank (CCB). They are considering changing the fee they charge to non-customers who use their automated teller machines (ATMs). CCB customers can use CCB ATMs without a fee. CCB conducted some market research and have found that when they raise their ATM fee, they actually increase the number of new checking account customers per day-the cross-price elasticity is positive. Non- customers get tired of paying the fee so they become customers. However, as you raise ATM fees you lose non-customer transactions at your ATMs. The non-customer demand for CCB ATM transactions is given by the equation Q = 19,000 - 6,000P. Right now CCB handles 10,000 non- customer ATM transactions per day at a fee of $1.50. a. What is the own-price elasticity for ATM fees charged to non-customers? N At the current ATM fee, should you raise or lower your ATM fees? Why? b. What should your new ATM fee be if your marginal cost of servicing an ATM transaction is $0 and you are only considering maximizing profits derived from ATM fees? N
Transcribed Image Text:QUESTION 4.6 Your summer internship is with the strategy department of Chevy Chase Bank (CCB). They are considering changing the fee they charge to non-customers who use their automated teller machines (ATMs). CCB customers can use CCB ATMs without a fee. CCB conducted some market research and have found that when they raise their ATM fee, they actually increase the number of new checking account customers per day-the cross-price elasticity is positive. Non- customers get tired of paying the fee so they become customers. However, as you raise ATM fees you lose non-customer transactions at your ATMs. The non-customer demand for CCB ATM transactions is given by the equation Q = 19,000 - 6,000P. Right now CCB handles 10,000 non- customer ATM transactions per day at a fee of $1.50. a. What is the own-price elasticity for ATM fees charged to non-customers? N At the current ATM fee, should you raise or lower your ATM fees? Why? b. What should your new ATM fee be if your marginal cost of servicing an ATM transaction is $0 and you are only considering maximizing profits derived from ATM fees? N
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