Question

From California to New York, legislative bodies across the United States are considering eliminating or reducing the surcharges that banks impose on noncustomers, who make $14 million in withdrawals from other banks’ ATM machines. On average, noncustomers earn a wage of $24 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 $1.00 per transaction, while noncustomers 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 minute traveling to another machine to withdraw cash. Based on this information, what would be the nonpecuniary cost of legislation that would place a $1.00 cap on the fees banks can charge for noncustomer transactions?

Answer 1

Nonpecuniary is basically a law where the loss cannot be quantified monetarily.

wage of noncustomers is $24 per hour

pay Atm fees is $3.25 for per transaction.

Now they are left over with 20.75 if the transcation takes place at a point of time.

Banks had to maintain a balance of around $6 million at $1 per transaction.

Customers gained by the bank are

Customers at end -customer at starting

If non customers conduct 22 million transcation at the existing price.

[he non pecuniary cost on the fees banks can charge for non customers transcation can increase because they have to maintain a minimum balance to obtain the target.