In the late 1990s, the city of Santa Monica, California, made it illegal for banks to charge people ATM fees. As you probably know, it€™s almost always free to use your own bank€™s ATMs, but there€™s usually a fee charged when you use another bank€™s ATM. As soon as Santa Monica passed this law, Bank of America stopped allowing customers from other banks to use their ATMs: In bank jargon, B of A banned €œout-of-network€ ATM usage.
In fact, this ban lasted for only a few days, after which a judge allowed banks to continue to charge fees while awaiting a full court hearing on the issue. Eventually, the court declared the fee ban illegal under federal law. But let€™s imagine the effect of a full ban on out-of-network fees.
a. In the figure, indicate the new price per out-of-network ATM transaction after the fee ban. Also clearly label the shortage.

b. Calculate the exact amount of producer and consumer surplus in the out-of-network ATM market in Santa Monica after the ban. How large is producer surplus? How large is consumer surplus?

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Out-of network fee Supply of ATM transactions $2 Demand for ATM transactions Number of out-of-network ATM transactions in Santa Monica