Transportation Economics Exam Questions and Correct Answers Latest Update 2024 (Already Passed)
Lecture 1: Introduction - Answers
Transportation is a major industry in its own right, but also influences: - Answers 1. Where firms locate their activities
2. Where people live
The Assumption of Sp...
Transportation is a major industry in its own right, but also influences: - Answers 1. Where firms locate
their activities
2. Where people live
The Assumption of Spaceless, Instantaneous Economy does not hold(PANDS) - Answers 1. People and
goods flow over networks at certain speeds
2. Advance ticket purchase often induced by lower fares
3. Demands may fluctuate over time
4. Networks may not be competitive
5. Single trip (final good for consumer) may require bundling of services provided by several firms,
agencies and modes
Transportation is also derived demand: - Answers 1. People do not travel for travel's sake
2. The trip itself is to be as short as possible
Similarly, *users of freight transportation perceive it as a cost in their overall production function* and
seek to minimize it
Latent Demand - Answers -pent-up (dormant) demand for travel; travel that is *desired but unrealized
because of constraints*
Induced Demand - Answers -realized *demand generated due to improvements in transportation
system*- *network expansion*
Fixed-Plant - Answers -usually *extremely long-lived and expensive* to replace
-fixed plants *give you huge economies of scale*
-once a rail track is laid, the *marginal cost of using it falls until some maximum capacity is reached*
Mobile-Plant - Answers -relatively *short-lived and replacement occurs with physical, rather than
technical obsolescence* as with the fixed components
-cheap
-prospect of alternative employment if demand declines in one market
,-subject to only *minimal supply economies*
These features of fixed and mobile components of transportation have influenced the institutional
arrangements in the sector: *Cost, Lifespan, Economies/Diseconomies/Unit Economies* - Answers 1.
High Cost of Provision, longevity, and scale economies associated with fixed components creates
tendency towards *monopoly control in the sector*
2. Ease of entry, flexibility, and lack of scale effects tend to stimulate *competition in the mobile sector*
Lecture 2: Demand for Transportation, 1 - Answers
The Desire for movement: Thomson's (1974) 7 reasons why people desire to transport themselves of
their property: - Answers 1. Obtaining acceptable bundle of all products
2. tapping markets for production inputs
3. *High-quality transportation allows exploitation of other economies of scale (e.g. automaton, bulk
handling, R&D activities, mass marketing, purpose-built equipment etc.)*
4. Political and military role
5. Without transportation, *social relationships and contracts are normally very restricted*
6. cultural opportunities*
7. *permits geographical separation of employment from leisure*
Historal Demand for Transportation in NYC- NYC Subway Ridership - Answers -In 2013, average weekday
subway ridership was highest since 1950
50s Subway ridership dropped off because of new cars and suburbanization
-60s there was stabilization of ridership
-70s NYC was in bad shape
-80s MTA economies were getting better with improving local econoy
-90s metro-card is introduced
, -00s better economy, change in demographics and increase in tourism
Bus Ridership - Answers -busses are inferior goods
-in 2009, dips caused by rising fares and cuts
-metrocard allows people to switch from subway to bus at no cost
Factors that influence transportation demand *(PTS)* - Answers 1. Price of Transportation
2. Tastes
3. Service Quality
1. price of transportation embraces more than simple money costs: - Answers -*Components of price
(i.e. time costs, waiting etc.) combined to form a generalized cost index* (to be discussed later in the
course)
-*Today we concentrate on money prices*, and in particular, on the *sensitivity of transportation users
to the price of transportation services*
Elasticity of Demand for Transportation - Answers -Subway and bus are relatively price inelastic
(although negative)-
-After metro-card instituted, the inelasticity was even stronger, due to ease of use
2. Tastes: Innertia and Asymmetry in Decision-Making - Answers -May be discontinuities in the demand
curve for transportation, reflecting almost total insensitivity to price changes, as a *result of habit and
hysteresis* on the part of individuals and firms
-*Demand curve is discontinuous at critical GC threshold (below use car, above use bus)(graph) -
g(generalized cost) on x axis, price on y axis*
*Why?*
-Costs involved in seeking out information about alternatives
-Continuing as before is rational response until major price changes occur
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