unit 6 Transport Modal Cost Structures, Competition and Pricing Principles

Question 1

explain what efficiency in transport means;

Question 2

discuss how economy can be achieved in transport;

Answer 2

Economic efficiency is the optimum use of resources so that the maximum return is
gained from any given set of resources.

Question 3

describe the cost structure of each mode of transport;

Answer 3

1.Air transport efficiency is dictated by cost level, economies of fleet size, economies of aircraft size, economies of infrastructure extension, and economies of distance.
2.Road transport has the smallest proportion of fixed costs in relation to total costs. Fixed costs typically consist of overhead costs (land and buildings, terminal facilities, corporate management, and insurance), and standing costs (depreciation, interest on capital, licenses, insurance, and crew costs). Variable costs consist of fuel consumption, Tyre usage, engine oil consumption, maintenance, and trip-specific operating costs.
3.Economies of fleet size in rail transport are attained through operating long trains in which the carrying capacity is well utilised.
4.Overland pipeline transport is the cheapest mode of transport – and substantially cheaper than road and rail transport. On the principle of economies of density, an increase in pipe diameter can result in a lower unit cost.

Question 4

five of the most pertinent factors that can contribute to economies
of fleet size:

Answer 4

Specialisation and division of labour
* Specialisation and scheduling of capital assets
* Indivisibilities
* Costly operational expenditure
* Reduced transaction costs