Scenario 16-5 Assume That a Local Bank Sells Two Services, Checking Accounts

question 224

Multiple Choice

Scenario 16-5
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 $2 a month for unlimited use of his ATM card. Ms. Beenthere is willing to pay only $5 for a checking account, but is willing to pay $9 for unlimited use of her ATM card. Assume that the bank can provide each of these services at zero marginal cost.
-Refer to Scenario 16-5.How much additional profit can the bank earn by switching to the use of a tying strategy to price checking accounts and ATM service rather than pricing these services separately?

• A)$14
• B)$11
• C)$7
• D)$1

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Definitions:

Marginal Benefits

The incremental value or satisfaction derived from the use of one more unit of a good or service.

Marginal Costs

represent the cost of producing one more unit of a good or service, calculated by the change in total cost that comes from producing one additional unit.

Economic Analysis

The study of how people use resources to produce goods and services for consumption and how those goods and services are distributed and consumed.

Government Policy

The plan of action or regulatory measures formulated and implemented by a governmental entity aimed at achieving specific goals or addressing certain issues within the society.