CTP Transportation Economics & Rate Structures 1

Question 1

Which primary factor is used to determine LTL (Less-Than-Truckload) freight rates under the NMFC classification system?

Accepted Answer

Freight class based on density, stowability, handling, and liability

Answer

NMFC freight classes (50–500) are determined by four characteristics: density, stowability, handling ease, and liability, which together define the freight class used to set LTL rates.

Question 2

What is 'cost-of-service' pricing in transportation?

Accepted Answer

Basing rates on the specific costs incurred to provide the transportation service

Answer

Cost-of-service pricing sets rates to recover the actual costs (fixed and variable) of providing the service, ensuring the carrier covers expenses including overhead and profit margin.

Question 3

A shipper negotiates a 'Freight All Kinds' (FAK) agreement with a carrier. What does this mean?

Accepted Answer

All commodities in a shipment are rated at a single agreed-upon freight class

Answer

FAK agreements allow shippers to rate all commodities at one negotiated class, simplifying billing and often lowering costs when a shipper moves mixed freight that would otherwise be classified at higher classes.

Question 4

In U.S. transportation regulation, what is the 'zone of rate flexibility' established by the Staggers Rail Act?

Accepted Answer

A band within which railroads can raise rates without ICC/STB review for market dominance

Answer

The Staggers Rail Act created a zone of rate flexibility allowing railroads to raise rates up to a percentage above variable costs without triggering Surface Transportation Board market dominance review.

Question 5

What is a 'contract rate' in transportation, as opposed to a 'tariff rate'?

Accepted Answer

A privately negotiated rate between a shipper and carrier, typically for committed volume

Answer

Contract rates are individually negotiated between shippers and carriers, often in exchange for volume commitments, and are not required to be publicly filed, unlike legacy tariff rates.

CTP - Certified Transportation Professional Practice Test

CTP - Certified Transportation Professional Practice Test

CTP Transportation Economics & Rate Structures 1