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Assume that a local bank sells two services-- checking accounts and ATM card services. Mr. Donethat is willing to pay $8 a month for the bank to service his checking account, and $10 a month for unlimited use of his ATM card. Ms. Beenthere wants to pay only $5 for a checking account, but will pay $15 for unlimited use of her ATM card. To keep this example simple, assume that the bank can provide each of these services at zero marginal cost. SHOW WORK. A) If the bank is unable to use tying, what is the profit-maximizing price to charge for a checking account? B) If the bank is unable to use tying, what is the profit-maximizing price to charge for unlimited use of an ATM card? C) If the bank is able to use trying to price checking account and ATM services, what is the profit-maximizing price to charge for the "tried good? D) How much additional profit does the bank make when it switches to use of a trying strategy to price checking accounts and ATM services? E) How much total surplus is generated from using trying to price the checking account and ATM services? How does that compare to the nontied pricing strategy? Which strategy has the largest deadweight loss?
Suppose you hired Janet, a real-estate agent, to help sell your house at the best possible price. As compensation, Janet will receive 3% of the selling price. Suppose Janet can sell the house in a few days by putting it on the market at $240,000, or ..
Discuss why workers join unions? What implications would this have for the organization that wishes to remain non-union? Would you join a union? Why or why not?
Certain environmental laws prohibit EPA from considering the costs of meeting various standards when the levels of the standards are set. Is this a good example of “putting first things first” or simply an unjustifiable waste of resources? Why?
Suppose a firm in a competitive market reduces its output by 20%, as a result the price of its output is likely to? Suppose a firm in a competitive market produces and sells 150 units of output and earns $1800 in total revenue from the sales, if the ..
Harry Smith owns a metal-producing company that is an unregulated monopoly. After considerable experimentation and research, total cost and marginal cost curves are: TC = 100 + 60Q + Q2 MC = 60 + 2Q where MC is marginal cost (in dollars) and Q is out..
The dynamic aggregate demand curve will shift to the right if there is a:
Modern comparative economists would object to the definition of economic systems only in terms of property ownership arrangements,
The US government decides to reduce the government budget deficit by increasing taxes and keeping government expenditures at the existing level. What are the effects of increasing taxes in the short and medium run for the US economy? Is it possible t..
The inverse demand function for grapefruit is defined by the equation p = 317 − 6q, where q is the number of units sold. The inverse supply function is defined by p = 5 + 6q. A tax of $48 is imposed on suppliers for each unit of grapefruit that they ..
What are the role of venture capitalists, how are they formed and how do they generate revenue? What impact do venture capitalist play in State Public Employee Pension Fund shortfalls (Specifically in PA)?
The following events happens in order: 1. Fed bought $100M in bonds from Bank A 2. Bank A then use $40M to buy bonds from bank B, and lend out $60M to a person A 3. Bank B holds everything as excess reserves. Person A withdraw $5M. Calculate the chan..
Does it seem logical that the amount of labor supplied (hours worked) will decrease if the wage rate gets high enough? Why or why not? Will this phenomenon differ as related to a summer job or permanent employment?
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