Transportation Economics & Rate Structures Flashcards

In freight classification, 'density' is calculated as weight divided by volume. Why is higher-density freight generally assigned a lower freight class?

Answer: Higher density means more weight per cubic foot, making better use of trailer space and lowering carrier cost per pound

Dense freight fills trailer capacity with more weight, reducing the carrier's cost per pound transported; lower freight classes reflect this efficiency and result in lower rates per hundredweight.

Which pricing strategy involves charging different rates to different customers for an identical transportation service based on their demand characteristics?

Answer: Price discrimination

Price discrimination allows carriers to charge varying rates to different customer segments based on demand elasticity, volume, or competitive pressure, maximizing revenue across the customer base.

In transportation economics, the 'headhaul' lane in a trade lane refers to:

Answer: The dominant, high-demand direction of freight flow where capacity is tight and rates are higher

The headhaul is the high-volume direction of a lane (e.g., inbound to a major market) where demand for capacity exceeds supply, driving higher rates compared to the backhaul direction.

Which of the following is an example of an 'accessorial charge' on a freight invoice?

Answer: A liftgate delivery fee charged when no dock is available at destination

Accessorial charges are fees for services beyond standard pick-up and delivery, such as liftgate service, inside delivery, residential delivery, or detention — they are added to the base line-haul rate.

What was the primary purpose of freight rate bureaus before transportation deregulation in the U.S.?

Answer: To allow competing carriers to collectively set and publish tariff rates under antitrust immunity

Rate bureaus allowed carriers to jointly establish and publish tariff rates with antitrust immunity; deregulation (Motor Carrier Act 1980, Staggers Act 1980) greatly curtailed this collective rate-setting.

In carrier cost analysis, 'line-haul cost' refers to:

Answer: The cost directly associated with moving freight between origin and destination, primarily driver wages and fuel

Line-haul costs are the variable costs tied directly to over-the-road movement — primarily driver pay, fuel, and tolls — as opposed to terminal handling, pickup/delivery, or overhead costs.

Which U.S. federal agency currently has primary jurisdiction over surface transportation economic regulation, including railroad rate disputes?

Answer: Surface Transportation Board (STB)

The Surface Transportation Board (STB) is the independent federal agency that succeeded the ICC in 1996 and handles railroad rate disputes, mergers, service issues, and certain pipeline and household goods matters.