Exam 4: Costing and Pricing for Transportation

A) the law of supply and demand
B) marginal utility
C) monopolistic competition
D) contestable markets

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Competition between a few large sellers ...

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A) responding to price changes.
B) reacting to government policies.
C) anticipating future market conditions.
D) changing prices in response to government instruction.

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The diminished role of the rate bureau i...

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Value of service pri...

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A) Mileage
B) Commodity
C) Standard
D) Discount

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A) price
B) rate
C) demand charge
D) supply charge

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B

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Cost of service pricing takes a marginal-cost approach to pricing. Cost of service pricing can also be analyzed as a total cost or fully allocated cost approach to price setting, where the price charged by a carrier for a movement of a commodity represents the recovery of the related costs to make the movement. Here: Price = FC + VC + Profit. Price is determined by the allocation of fixed costs and variable costs to the commodity movement and adding a margin for profit. Relating pricing to total costs or fully allocated costs does not take into account such considerations as competition and elasticity of demand affecting the price charged. The presence of common costs raises some problems for cost-of-service pricing, particularly the average cost approach. If rates are based upon average of fully allocated costs, it becomes necessary to apportion these costs by some arbitrary means.

A) Firm's products or services are homogeneous
B) only one group of customers
C) there are costs which are not the responsibility of the customer
D) the firm possess some monopolistic power

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A rate, appropriate to the regulation of...

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A) Profit maximization
B) Skimming pricing
C) Penetration pricing
D) Survival-based pricing

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A) pricing based upon common costs
B) Pricing based upon what the traffic will bear
C) pricing based on marginal costs
D) pricing based on average costs

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B

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Third-degree price discrimination is whe...

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A) Rates based upon average or fully allocated cost makes it necessary to apportion common costs by some arbitrary means.
B) Motor carriers are structured such as to make allocation extremely difficult.
C) Rail carriers have difficulty defining their common costs as they have wide spread geographic operations
D) All transport firms have significant difficulty with cost concepts due the very nature of their operations

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A) head haul, back haul and extent of competition
B) commodity and density
C) prices based on average or marginal cost
D) competition and direction of travel

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A) the model is used to determine the lower limit of freight rates
B) the model considers the supply side of the transportation pricing function
C) the value of the product is considered to be irrelevant in the determination of the freight rate
D) the model considers the ability of the commodity to bear a charge

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A) shippers should pay rates high enough to insure a high profit for the carrier.
B) carriers should set prices based on the level of service they offer
C) rates should be related to value of the commodity - the higher the value of the commodity the higher the rate should be
D) shippers should offer a price that they feel is fair in relation to the service offered.

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A) the seller must prevent transfer of sales between the groups or submarkets.
B) the seller must have "market dominance".
C) the buyer must have profit maximization as a goal.
D) the buyer must have variable costs that have to be recovered.

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