Simple Pricing

Pricing ATM Machines (Simple Pricing)

A bank in a medium-sized Midwestern city, Firm X, currently charges $1 per transaction at its ATMs.  To determine whether to raise price, the bank managers experimented with a number of higher prices (in 25 -cent increments) at selected ATMs.  The marginal cost of an ATM transaction is $0.50.

ATM Fee Usage
$2.00 1,000
$1.75 1,500
$1.50 2,000
$1.25 2,500
$1.00 3,000

What ATM fee should the bank charge?

Book:

Managerial Economics: A Problem Solving Approach
Authors: Luke M. Froeb and Brian T. McCann
ISBN-13: 978-0-324-35981-7
ISBN-10: 0-324-35981-0