According to the information provided, if the bank is unable to use tying, what is the profit-maximising price to charge for unlimited use of an ATM card?
A)$5
B)$10
C)$14
D)$15

Question

Quizplus · Accepted Answer

Without the option of tying, the bank can only charge a price for the ATM card. The profit-maximizing price is where marginal cost equals marginal revenue. From the table, we can see that at a price of $14, the bank can sell 9 cards, and the marginal revenue of selling the 9th card would be equal to the marginal cost ($6). At any price lower than $14, the marginal revenue would be higher than the marginal cost, so the bank would want to sell more cards. At any price higher than $14, the marginal cost would be higher than the marginal revenue, so the bank would want to sell fewer cards. Therefore, the profit-maximizing price for unlimited use of an ATM card is $14.

According to the Information Provided, If the Bank Is Unable