Transport Economics Unit 6

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Questions and Answers

What do transport costs refer to?

The expenses involved in moving products or assets to a different place (correct)

The costs of building and maintaining roads

The costs of hiring transportation personnel

The costs associated with the production of vehicles

What is one of the learning outcomes of this unit?

Evaluate the impact of transportation on the environment

Explain different categories of transport costs (correct)

Explain the importance of traffic congestion

Discuss the history of transportation economics

Why do businesses incur transportation costs?

To bring their products to retailers for sale to consumers (correct)

To reduce their production costs

To provide transportation services to customers

To increase their profit margins

What is one of the topics that will be discussed in this unit?

The impact of positive and negative transport externalities Signup and view all the answers

What is one of the strategies that will be discussed in this unit?

Price discrimination Signup and view all the answers

What is the name of the lecturer for this unit?

Dr. Helvi Petrus Signup and view all the answers

What is the broader category of costs that includes private costs?

Social Costs Signup and view all the answers

What is another term for internal costs?

Direct costs Signup and view all the answers

What is an example of a fixed cost?

Vehicle insurance Signup and view all the answers

Which of the following is not a variable cost?

Depreciation on the vehicles Signup and view all the answers

What is a consequence of transportation that is considered an environmental cost?

Pollution (air, water, soil, noise) Signup and view all the answers

What is the term used to describe the costs that are attributed directly to the operation of vehicles?

Direct costs Signup and view all the answers

What is an example of a social cost?

Pollution (air, water, soil, noise) Signup and view all the answers

What type of cost remains the same, irrespective of the amount of kilometers that a vehicle travels in a period?

Fixed cost Signup and view all the answers

What is an example of negative externality caused by industries?

Water pollution Signup and view all the answers

What is a benefit of flu vaccination to an individual who did not pay for it?

Not getting flu Signup and view all the answers

What is an example of a positive externality of wide streets and roads?

Acting as a fire break Signup and view all the answers

What is a negative externality caused by airport noise?

Noise pollution Signup and view all the answers

What is an example of innovation that reduces pollution?

Hybrid vehicles Signup and view all the answers

What is a benefit of locating firms near each other?

The benefit firms obtain Signup and view all the answers

What is an example of a negative externality of car alarm?

Noise pollution Signup and view all the answers

What is a positive externality of accessibility?

Increasing social equity Signup and view all the answers

What is an externality?

A cost or benefit imposed on a third party by an individual's actions Signup and view all the answers

What is a characteristic of negative externalities?

They are a cost that falls on people other than those who pursue the activity Signup and view all the answers

What is an example of a negative externality?

Air pollution from burning fossil fuels Signup and view all the answers

What is the result of the increase of greenhouse gases in the atmosphere?

More heat being reflected to the earth Signup and view all the answers

What is the external cost of global warming?

An increase in sea levels, floods, drought, heat waves, and tornadoes Signup and view all the answers

What is a source of greenhouse gases?

The burning of fossil fuels Signup and view all the answers

Who bears the cost of negative externalities?

Third parties who are affected by the activity Signup and view all the answers

What is the difference between positive and negative externalities?

Positive externalities benefit third parties, while negative externalities cost them Signup and view all the answers

What is the primary mechanism through which pecuniary externalities arise?

Changes in prices Signup and view all the answers

What is the result of a firm dumping waste into a river?

Reduced utility for fishermen Signup and view all the answers

What is the consequence of congestion on transportation systems?

Slower speeds, longer trip times, and increased vehicular queuing Signup and view all the answers

What is the impact of time cost on users of transport services?

They lose valuable time due to congestion Signup and view all the answers

What is an example of a technological externality?

A firm dumping waste into a river, affecting the utility of fishermen Signup and view all the answers

What happens to the price of property in Okahandja when many people move out of Windhoek?

The price of property in Okahandja increases Signup and view all the answers

What is the relationship between time and money in the context of transportation?

Time is money, as time spent on transportation is equivalent to money spent Signup and view all the answers

What is the definition of congestion in transportation systems?

A situation where there are too many vehicles on the road at a specific time Signup and view all the answers

Study Notes

Unit 6: Transport Economics

Overview of Transport Costs

Transport costs refer to the expenses involved in moving products or assets to a different place, which are often passed on to consumers.
Examples include a business incurring transportation costs to bring products to retailers for sale to consumers.

Categories of Transport Costs

Internal costs (direct costs): costs incurred by users and operators of transport services, such as fuel, maintenance, repairs, insurance, and depreciation.
External costs: costs imposed on third parties, such as environmental costs, pollution, congestion, and accidents.

Internal Costs (Direct Costs)

Fixed costs: costs that do not vary with the level of activity or output, such as rent, taxes, fixed salary, vehicle insurance, license fees, and depreciation.
Variable costs: costs that change in proportion to changes in company activity, such as fuel, maintenance, and repairs.

External Costs

Externalities: unintended effects of some activities that accrue to people not directly involved in those activities.
Positive externalities: beneficial effects on third parties, such as flu vaccination or wide streets acting as a fire break.
Negative externalities: costs incurred by third parties, such as air pollution, water pollution, congestion, and noise pollution.

Examples of Negative Externalities

Air pollution from burning fossil fuels, causing damage to human and animal health, crops, and historic buildings.
Water pollution by industries and maritime transportation, harming plants, animals, and humans.
Congestion and higher accident risks imposed by cars and other vehicles.
Consumption of alcohol leading to traffic accidents.

Examples of Innovation to Reduce Pollution

Electric vehicles.
Hybrid vehicles.
Aeroplanes powered by biofuel.

Positive Externalities

Flu vaccination benefiting others who did not pay for it.
Wide streets and roads acting as a fire break.
Proximity to good transport networks affecting land values.
Benefits of firms locating near each other.
Accessibility increasing social equity.
Ability to provide emergency services.

Time Cost

Time spent on making a journey, which is equivalent to lost productivity.
Congestion increasing the running time of transports, leading to more fuel consumption.

Congestion

Occurs when transportation systems perform at an unacceptable level.
Characterized by slower speeds, longer trip times, and increased vehicular queuing.
Traffic congestion is a condition on road networks that occurs as use increases.

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Description

This quiz covers the concepts of transport economics, including internal costs, external costs, time costs, and joint and common costs. It is part of the Faculty of Management Sciences course.