A Local Bank Sells Two Services, Cheque Accounts and ATM

question 87

Multiple Choice

A local bank sells two services, cheque accounts and ATM card services. Mr Donethat is willing to pay $8 a month for the bank to service his cheque account and $2 a month for unlimited use of his ATM card. Ms Beenthere is willing to pay only $5 for a cheque account but is willing to pay $9 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.
-According to the information provided, how much additional profit does the bank make when it switches to use of a tying strategy to price cheque account and ATM services?

• A) $14
• B) $8
• C) $10
• D) $1

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Definitions:

Offset

To counterbalance, compensate, or neutralize the effect of something by applying an opposing force or effect.

Futures Contract

A legally binding contract to acquire or dispose of a specific item at an agreed-upon price at a future date.

Contract Size

Refers to the deliverable quantity of commodities or financial instruments like futures and options contracts specified in the contract terms.

Acceptable Grade

A term that might refer to a minimum satisfactory academic or performance level, but could require more context to define precisely.