The U.S. Postal Service (USPS) charges Amazon about $2 to deliver a package. The USPS argues that

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The U.S. Postal Service (USPS) charges Amazon about $2 to deliver a package. The USPS argues that its contract with Amazon allows it to reduce the loss it suffers on its overall operations. A business writer for the Washington Post observes, “Looked at from the standpoint of incremental revenue (huge) minus these incremental expenses (modest), the Postal Service could very easily have come to the conclusion that, even at $2 a package, the Amazon contract was likely to be highly profitable.” What does the writer mean by “incremental revenue” and “incremental cost”? Why would he focus on incremental revenue and incremental cost rather than on total revenue and total cost?

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Macroeconomics

ISBN: 9780135801741

8th Edition

Authors: Glenn Hubbard, Anthony Patrick O Brien

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