rom California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges banks impose on non-customers, who make $14 million in withdrawals from other banks’ ATM machines. On average, non-customers earn a wage of $26 per hour and pay ATM fees of $3.25 per transaction. It is estimated that banks would be willing to maintain services for 6 million transactions at $1.50 per transaction, while non-customers would attempt to conduct 22 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 minutes traveling to another machine to withdraw cash. (a) Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.50 cap on the fees banks charge for non-customer transactions? (b) What would be the full economic price of this legislation? (c) Using a graph, illustrate the situation described above
rom California to New York, legislative bodies across the United States are considering eliminating or
reducing the surcharges banks impose on non-customers, who make $14 million in withdrawals from other
banks’ ATM machines. On average, non-customers earn a wage of $26 per hour and pay ATM fees of $3.25
per transaction. It is estimated that banks would be willing to maintain services for 6 million transactions
at $1.50 per transaction, while non-customers would attempt to conduct 22 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 minutes traveling to another machine to withdraw cash.
(a) Based on this information, what would be the nonpecuniary cost of legislation that would place a
$1.50 cap on the fees banks charge for non-customer transactions?
(b) What would be the full economic price of this legislation?
(c) Using a graph, illustrate the situation described above
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