At FedEx, the marginal cost incurred in delivering packages speedily often encompasses more than just the expense
Question:
At FedEx, the marginal cost incurred in delivering packages speedily often encompasses more than just the expense of physically transporting a package from one location to another. The additional cost of delivering one more package also involves the cost of providing information to senders or recipients checking on the status of the package. Before most people had access to the Internet, FedEx provided tracking services only by telephone. Hundreds of thousands of customers would call each day and give the tracking numbers of their packages to FedEx’s representatives, who would check the status of a package on the company’s internal computer system. The additional cost of providing this service exceeded $2.00 per package. Today, a customer can go to www.fedex.com, enter the package’s tracking number, and view its current status. Maintaining this service on the Internet to respond to 3 million tracking requests per day costs FedEx about 4 cents per package.
What has happened to FedEx’s marginal cost curve? What has happened to FedEx’s average total cost curve?
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