Test Bank For Transportation A Global Supply Chain Perspective, 10th Edition Robert A. NovackBrian G

Test Bank For Transportation A Global Supply Chain Perspective, 10th Edition Robert A. NovackBrian GibsonYoshinori Suzuki Chapter 1-13

Chapter 01: Global Supply Chains: The Role and Importance of Transportation

1. Transportation has been described as: a. The glue that holds the supply chain together b. Challenging and unnecessary c. A gamechanger d. Expensive service ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

2. Which of the following countries has the largest export trade flow of merchandise? a. China b. United States c. Germany d. Japan ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

3. Which of the following countries has the largest import trade flow of merchandise? a. China b. United States c. Germany d. Japan

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ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

4. In 2020, the top 30 exporting countries account for what percentage of the world‘s export of merchandise trade? a. 31.7% b. 85.3% c. 86.9% d. 90% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

5. Insight into the health of a supply chain can be gained by review of the volume of global trade and: a. gross domestic partner b. gross domestic product c. global imports only d. global exports only ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.2 - Discuss the importance of transportation to globalization and how it contributes to the effective flow of commerce among close and distant regions.

6. Which of the following led to the spectacular growth in global trade between the year 2000 and the present? a. Greater acceptance of products manufactured in other countries b. Elimination of trade agreements c. Higher tariffs d. The recent pandemic ANSWER: a

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POINTS: 1 DIFFICULTY: Medium REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

7. Which country is ranked third in both import and export flows of merchandise? a. China b. Germany c. Japan d. United States ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.2 - Discuss the importance of transportation to globalization and how it contributes to the effective flow of commerce among close and distant regions.

8. Which of the following countries had the largest population in 2022? a. United States b. China c. India d. Indonesia ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: The Economic Basis and Logic of Improved Global Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.6 - Discuss the size and age distribution of the population and the growth rate of the major countries of the world and understand how the size of the population can impact a country positively or negatively.

9. Which of the following countries is expected to have the largest population by 2050? a. United States b. China c. India d. Indonesia ANSWER: c POINTS: 1

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DIFFICULTY: Easy REFERENCES: The Economic Basis and Logic of Improved Global Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.6 - Discuss the size and age distribution of the population and the growth rate of the major countries of the world and understand how the size of the population can impact a country positively or negatively.

10. In 2020, what percentage of people in the world were 60 years or older? a. 1.9% b. 11.6% c. 18.5% d. 20% ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Contributing Factors for Global Flows and Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.6 - Discuss the size and age distribution of the population and the growth rate of the major countries of the world and understand how the size of the population can impact a country positively or negatively.

11. In 2020, what estimated percentage of the world‘s population lived in urban areas? a. 29% b. 30% c. 47% d. 56.1% ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Urbanization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.7 - Understand the challenges and opportunities associated with the world-wide growth in urbanization and why there has been such a major shift from rural to urban areas.

12. What of the following continents is estimated to have 18 megacities? a. Europe b. South America c. Africa d. Asia ANSWER: d POINTS: 1 DIFFICULTY: Medium

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REFERENCES: Urbanization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.7 - Understand the challenges and opportunities associated with the world-wide growth in urbanization and why there has been such a major shift from rural to urban areas.

13. What positive outcomes have occurred in the global economy with increased interdependence? a. Reduced prices b. Limited availability of goods c. Lower employment opportunities d. Higher prices ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Globalization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.5 - Explain the underlying economic basis for international exchange of goods and services for the overall benefit of two or more countries or regions and gain some perspective on the volume and overall importance of the more advanced countries of the world.

14. On the micro level, global interdependence has ___________. a. increased competition b. decreased the level of complexity c. reduced outsourcing d. increased product lifecycles ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Globalization QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.5 - Explain the underlying economic basis for international exchange of goods and services for the overall benefit of two or more countries or regions and gain some perspective on the volume and overall importance of the more advanced countries of the world.

15. When did the supply chain management concept capture the attention of senior level executives in many organizations? a. 1960s b. 1980s c. 1990s d. 2000s ANSWER: c POINTS: 1 DIFFICULTY: Easy

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REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.5 - Explain the underlying economic basis for international exchange of goods and services for the overall benefit of two or more countries or regions and gain some perspective on the volume and overall importance of the more advanced countries of the world.

16. Reverse logistics systems are developed for: a. returning unacceptable products b. returning rail box cars c. eliminating empty back hauls d. receiving payment from customers ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

17. Forward information in the supply chain is utilized to: a. provide advanced shipment notices b. reduce the need for working capital c. decrease the visibility of inventory levels d. Eliminate the empty back hauls ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

18. Cash flow is important to organizations producing products for sale because it: a. reduces the need for working capital b. eliminates the need for checks to pay vendors c. provides bonus money for employees d. increases viability of inventory levels ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice

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HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

19. Which of the following is not a major flow in a supply chain? a. Information b. Raw material c. Financials d. Products ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

20. One effective method to reduce the bullwhip effect in a supply chain is to replace inventory with: a. information b. outsourcing c. financials d. transportation ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

21. Which of the following countries are in the VISTA? a. Vietnam, Indonesia, South Africa, Turkey, and Argentina b. Vietnam, Indonesia, Singapore, Thailand, and Australia c. Vietnam, India, Singapore, Turkey, and Argentina d. Vietnam, India, South Africa, Thailand, and Australia ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False

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LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

22. Which of the following countries are in the BRIC? a. China, Bulgaria, Romania, and Indonesia b. Brazil, Russia, India, and China c. Mexico, Honduras, Panama, and El Salvador d. Britain, Canada, Italy, and Russia ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

23. Adam Smith wrote a book entitled: a. The China Syndrome b. Total Cost of Transport c. The Logistician’s Guide d. The Wealth of Nations ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

24. Another name for the extended enterprise perspective of the supply chain is: a. boundary spanning b. slow and low c. flat earth d. absolute advantage ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of

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countries and allow them to penetrate global markets.

25. The size of a country‘s population is important because: a. governments must provide food b. land use increases c. labor is a prime factor for economic growth d. transportation networks must be developed ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Contributing Factors for Global Flows and Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO1.8 - Appreciate the importance and impact of land and resources to the economic advancement and development of the various countries of the world and how they can be exploited to their advantage.

26. Advantages to globalization include: a. lower prices b. limited availability of goods and services c. low employment opportunities d. higher prices ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Supply Chain Concept QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 1.5 - Explain the underlying economic basis for international exchange of goods and services for the overall benefit of two or more countries or regions and gain some perspective on the volume and overall importance of the more advanced countries of the world.

27. What is the meaning of a ―black swan‖ event with regard to transportation?

ANSWER: The term ―black swan‖ refers to the hoarding of certain necessities and demand far exceeding consumption.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Global Supply Chain Flows QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

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28. What is a megacity?

ANSWER: A relatively new term to describe cities with populations over ten million.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Urbanization QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.7 - Understand the challenges and opportunities associated with the world-wide growth in urbanization and why there has been such a major shift from rural to urban areas.

29. What are the two important dimensions of technology?

ANSWER: Technology can be viewed as both an internal and external agent of change for organizations.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Technology and Information QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

30. Why was the development of the Internet such an important external change agent?

ANSWER: The Internet alone was the biggest ―culprit‖ or agent of change because it made information available in real time to large segments of the population via their personal computers, telephones, or other devices.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Technology and Information QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

31. Describe ―3D‖ printing.

ANSWER: It is also called additive manufacturing and allows corporations and other organizations to duplicate or make a physical copy of an object, similar to what happens with 2-D copy machines.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Technology and Information QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False

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STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

32. What factors accounted for growth in the volume of global trade?

ANSWER: A number of factors came into play: economic growth, trade agreements, lower tariffs, and a greater acceptance of importing finished products that were manufactured in other countries, not just raw materials.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Global Supply Chain Flows QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.1 - Appreciate why efficient transportation systems are so critical to advance the growth and development of regions and countries, and how they contribute to social and political systems as well as national defense.

33. Differentiate between absolute and comparative advantage.

ANSWER: While both concepts provide a rationale for trade between regions or countries, there is a difference. Absolute advantage postulates that trade is beneficial when the two regions or countries both have an advantage in producing one of two products in terms of cost. Absolute advantage recommends that they each produce the one product where they have the advantage; then, trade will be mutually beneficial. Comparative advantage postulates that even if one country or region has a low-cost advantage for both products, trade can be beneficial if the low cost country has a comparative advantage in one of the products.

POINTS: 1 DIFFICULTY: Hard REFERENCES: The Economic Basis and Logic of Improved Global Trade QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

34. Besides a country‘s population, name the demographics important for economic growth?

ANSWER: In addition to size, education and skill levels are important indicators of labor efficiency. The age distribution of the country‘s population is also important. A younger population usually means a larger labor pool and more potential for families and market demand. The general health of citizens and average life span are of interest.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Contributing Factors for Global Flows and Trade QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic

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LEARNING OBJECTIVES: LO 1.3 - Understand how global supply chains can contribute to the competitive position of countries and allow them to penetrate global markets.

35. What is a megacity, and why are they important for the future?

ANSWER: The term megacity is relatively new and describes urban areas with populations over ten million. They represent a world-wide trend of populations migrating to urban areas. In developing nations, the major challenges will be creating the infrastructure, transportation systems, and utilities to support the population adequately.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Urbanization QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.7 - Understand the challenges and opportunities associated with the world-wide growth in urbanization and why there has been such a major shift from rural to urban areas.

36. Why was information technology so impactful for businesses and other organizations?

ANSWER: Information technology has been a major factor in increasing competition, changing business models, and making some businesses obsolete. It has expedited outsourcing strategies and provided an opportunity for businesses, large or small, to participate in supply chains over a wider geographic area. Information technology has afforded both opportunity and disruption, and the end is not in sight.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Technology and Information QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

37. What impact has robotics had on supply chains?

ANSWER: The skills of humans combined with the precision and efficiency of robots have led to improved productivity in distribution centers where the robots store, retrieve, and pack goods for distribution. More is yet to come!

POINTS: 1 DIFFICULTY: Medium REFERENCES: Technology and Information QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.9 - Explain why technology has become such an important ingredient for the economic progress of companies and countries in today‘s global economy and understand the need for and types of technology.

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38. Explain the three major flows in a supply chain.

ANSWER: The three major flow areas are: product/services, information, and finances.

Product flow is a traditional area of importance for logistics to acquire, make, and distribute finished products in an efficient and timely manner. It is directly dependent upon efficient transportation.

Information flow becomes a very important factor for success in supply chain management; figuratively, information is the trigger or signal for the logistics or supply chain system to respond to a customer‘s order.

Financial cash flow is the payback for efficiently and effectively accomplishing the supply chain's objectives.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Supply Chain Concept QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.2 - Discuss the importance of transportation to globalization and how it contributes to the effective flow of commerce among close and distant regions.

39. What is the bullwhip effect, and why is it important?

ANSWER: When there is uncertainty about demand and long intervals between information flows, inventory builds up in the supply chain to prevent stock outs. The further back in the supply chain an organization is from the market, the greater the uncertainty, usually the higher the level of safety stock.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Supply Chain Concept QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.2 - Discuss the importance of transportation to globalization and how it contributes to the effective flow of commerce among close and distant regions.

40. Describe the three phases of development for the supply chain concept.

ANSWER: The three phases are: physical distribution, business logistics, and supply chain management.

Physical distribution was developed during the 1960s with a focus on the outbound side of a producer. In other words, this involved the period after a product was produced until it reached the customer and focused on minimizing the total cost of that phase.

Business logistics added the inbound side with a continued focus upon the lowest total cost.

Supply chain management focused on extended enterprises and the three major flows— products, information, and cash.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Supply Chain Concept QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 1.2 - Discuss the importance of transportation to globalization and how it contributes to

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the effective flow of commerce among close and distant regions.

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Chapter 02: Transportation and the Economy 1. The more efficient the transportation system, the: a. greater the possibility of scale economies and increased market areas. b. greater the possibility of scale economies and decreased market areas. c. lesser the possibility of scale economies and increased market areas. d. lesser the possibility of scale economies and decreased market areas.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Historical Significance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.1 - Understand the importance of transportation to the economic vitality of the United States and other countries and regions and why it is probably our most important industry.

2. Transportation systems are critical to developed economies because: a. they bring chaos. b. they bring order out of chaos. c. they bring fewer jobs. d. they decrease war.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Historical Significance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.1 - Understand the importance of transportation to the economic vitality of the United States and other countries and regions and why it is probably our most important industry.

3. What was the primary reason for the creation of the U.S. interstate highway system? a. Commerce b. Defense c. To create depression era jobs d. To promote manufacturing ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Economics of Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.2 - Appreciate the role and contributions of transportation systems to the economic development of countries or regions.

4. A transportation shipment of 75 tons for 125 miles would be:

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Chapter 02: Transportation and the Economy a. 200 ton-miles b. 3125 ton-miles c. 6250 ton-miles d. 9375 ton-miles ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

5. If a product costs $100 to produce, the firm expects 15% margin on the cost to produce, and transportation per unit costs $5, what is the lowest price the firm is likely to accept for the product? a. $100 b. $105 c. $115 d. $120 ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

6. Based on Lardner‘s Law, if transportation costs decrease by $2500, how much does the relevant market area increase? a. 50% b. 200% c. 400% d. 600% ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

7. What key element is critical to the ability to sell products made in large scale production facilities?

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Chapter 02: Transportation and the Economy a. Efficient transportation b. Highly technical production c. Just in time sourcing d. High quality design ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

8. Which mode of transportation is most important in terms of freight ton-miles? a. Air Carriers b. Rail Carriers c. Motor Carriers d. Pipelines ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

9. Which mode of transportation is most important in terms of passenger-miles? a. Air Carriers b. Rail Carriers c. Motor Carriers d. Water Transport ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

10. What was the average percentage of passenger-miles traveled in the United States in 2020? a. 14

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Chapter 02: Transportation and the Economy b. 23 c. 52 d. 92 ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

11. How much of ton-mile traffic in the U.S. is carried by air mode? a. 1% b. 4% c. 10% d. 15% ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

12. Which of the following costs would be affected by the transit time? a. Inventory b. Marketing c. Production d. Insurance ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

13. In terms of average household expenses, transportation is: a. First b. Second

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Chapter 02: Transportation and the Economy c. Third d. Last ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

14. Aggregate demand for transportation is __________, while demand for transportation on a price sensitive level is __________? a. elastic, elastic b. elastic, inelastic c. inelastic, inelastic d. inelastic, elastic ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

15. Which of the following refers to the consistency of transit times? a. Security b. Capability c. Reliability d. Accessibility ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.5 - Discuss the impact that improved transportation has upon land values and economic development.

16. Improvements in transportation will usually cause land values to: a. increase. b. decrease.

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Chapter 02: Transportation and the Economy c. remain the same. d. commercialize.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.5 - Discuss the impact that improved transportation has upon land values and economic development.

17. Which of the following is considered a non-economic transportation regulation area? a. Safety b. Large-scale Production c. Quality Utility d. Land ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.7 - Appreciate the function and scope of transportation in advanced and developed economies.

18. Which of the following is considered a transportation service characteristic? a. Land Values b. Time c. Reliability d. Place Utility ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

19. Transportation is considered which type of demand? a. Derived b. Independent c. Primary

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Chapter 02: Transportation and the Economy d. Substitute ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

20. Average transportation expenditures are about what percentage of GDP in the U.S. in 2020? a. 1% b. 10% c. 16% d. 20% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

21. The Mississippi River is regarded as an important avenue for commerce in the U.S. because: a. it is a major transportation artery. b. its color is muddy. c. the river is small. d. the river floods often.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Up and Down with the Big Muddy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.1 - Understand the importance of transportation to the economic vitality of the United States and other countries and regions and why it is probably our most important industry.

22. What is the usual demand metric for freight? a. Passenger distance b. Ton-mile c. Freight to weight ratio d. Containers per mile

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Chapter 02: Transportation and the Economy ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

23. A useful analytical tool for the study of transportation is: a. Passenger-miles b. Deregulation c. Cass Freight index d. Modal split ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

24. The sensitivity of customers to changes in price is called: a. demand elasticity. b. inelasticity. c. fully landed cost. d. marginal cost.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

25. Value of service considers the: a. role intramodal transport has on road networks. b. freight-to-weight ratio for rail shipping. c. impact of transportation costs and services on the demand for the product. d. impact of transportation costs only.

ANSWER: c

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Chapter 02: Transportation and the Economy POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

26. Transportation provides what critical link in the global economy?

ANSWER: Transportation provides the link between producers and consumers.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Transport Measurement Units QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

27. The investment by government in transportation infrastructure is frequently referred to as: ANSWER: Social Capital POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

28. How has the automobile impacted a person‘s lifestyle in the United States?

ANSWER: The convenience, flexibility, and relatively low cost of automobile travel allow individuals to live in locations distant from where they work.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

29. In addition to its economic role, what other roles are associated with transportation?

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Chapter 02: Transportation and the Economy ANSWER: Political, social, and national defense POINTS: 1 DIFFICULTY: Hard REFERENCES: Transport Measurement Units QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

30. What are the demand metrics for freight and for people?

ANSWER: For freight, the usual demand metric is the ton-mile, and for people, the unit is the passenger-mile.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

31. Explain the economic importance of transportation in a global economy.

ANSWER: Transportation is considered the life support system of a civilization. Transportation systems have a major impact on population patterns and economic development. The lack of transportation infrastructure is considered one of the significant factors that has restrained economic development in many third world countries. From a daily living perspective, transportation is critical to supporting the tremendous resource requirements of the average U.S. citizen. For example, a city of 3 million people requires more than a million pounds of meat, poultry, fish, eggs, cheese, and beverages a day. In a global economy, transportation‘s role is critical because of these opportunities to import and export products and enhance this overall viability of many economies.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Economics of Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.2 - Appreciate the role and contributions of transportation systems to the economic development of countries or regions.

32. Explain how transportation can contribute to the economic value of a product.

ANSWER: Transportation cost has an important impact on the level of demand that a commodity will have. As transportation costs increase, demand for a product will generally go down (this is especially true the more elastic the demand). For example, if a commodity cost $10 to

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Chapter 02: Transportation and the Economy purchase and people in a certain part of the country are willing to pay $12 for that commodity, it can only be sold if the transportation cost is less than $2 per unit. On the other hand, decreases in transportation cost can expand this market area and increase demand.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.6 - Understand how transportation affects the price of goods, services, and market areas.

33. Explain time utility.

ANSWER:

The concept of time utility is closely aligned to that of place utility. The demand for a particular commodity may only exist during certain periods of time. If a product arrives in a market at a time when there is no demand for it, then it possesses no value. For example, the demand for Halloween costumes exists during a specific time of the year. After Halloween passes, these goods cannot be sold because they have little or no value in the market.

Effective transportation can create time utility by ensuring that products arrive at the proper locations when needed.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Historical Significance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.4 - Appreciate the historical role of transportation from an economic, social, and political perspective.

34. Explain what economies of scale mean.

ANSWER: Geographic specialization is complemented by large-scale production or economies of scale, which are the result of more efficient operations. However, without the use of efficient transportation networks, the advantages of scale economies, production efficiencies, and specialization could be lost. The raw materials for production need to be transported to a manufacturing facility, and the finished products must be transported out of an area at reasonable costs to markets and consumers at acceptable prices. Otherwise, the goods have no value. Geographic specialization assumes that the large-scale production of goods is demanded at different locations. Therefore, an area cannot rely upon its comparative advantage and large-scale production without the use of efficient transportation systems. The more efficient the transportation, the larger the potential market area and possibility of increased scale economies.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False

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Chapter 02: Transportation and the Economy STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.3 - Understand how transportation of goods and people impacts the social and political dimensions of an economy or region.

35. Explain the role and importance of the Mississippi River System.

ANSWER: The Mississippi River has been an important avenue of commerce for several centuries in the United States. It has been referred to as the ―Big Muddy‖ by many individuals because of the color of the water and the amount of soil that washes down the river from northern states, especially during the spring, and is deposited in the so-called deltas near the Gulf of Mexico.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Up and Down with the Big Muddy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.1 - Understand the importance of transportation to the economic vitality of the United States and other countries and regions and why it is probably our most important industry.

36. Explain the roles and importance of land values.

ANSWER: Transportation improvements that enhance an area‘s economy also can increase the value of land that is adjacent to or served by the transport improvements because the land becomes more accessible and potentially more useful. Today, the suburban centers provide excellent examples of land areas that have increased in value due to the accessibility that results from efficient transportation systems or infrastructure. Suburbanites can take advantage of nearby city life for work and pleasure and then retire to rural areas via public transportation networks or highways to avoid crowded living conditions. Commuters from Greenwich, Connecticut, to New York City and from Cherry Hill, New Jersey, to Philadelphia all reap both city and suburban benefits as the result of reliable transportation systems. Consequently, the value of the land in the suburban areas has increased to reflect the advantageous lifestyles that the new or improved transportation systems have made possible. The land values within the city are obviously also enhanced by the economic development.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.5 - Discuss the impact that improved transportation has upon land values and economic development.

37. Explain modal split and its importance.

ANSWER: Modal split is an analytical tool used to study and analyze the total transportation market for passenger and freight transport according to volume and mode. For passenger transportation, more than 77 percent of the passenger mile traffic is private highway traffic. Since 1970, air travel has decreased in relative cost, so air traffic passenger miles have increased, but are still relatively small. Looking at freight, intercity modal split is dominated by trucks. Since 1990,

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Chapter 02: Transportation and the Economy rail share has increased in ton-miles due to the rising cost of fuel, but the lower cost recently has aided motor carriers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.5 - Discuss the impact that improved transportation has upon land values and economic development.

38. What is transportation‘s impact on the environment?

ANSWER: Transportation is the backbone of the economy and provides numerous benefits. However, associated with these benefits is some associated societal cost. Transportation pollutes the environment and consumes natural resources. Those who use transportation must always consider the tradeoff between benefit and cost. Increasingly, this tradeoff is getting more attention. There is growing realization and acceptance by businesses that they have an important role to play in maintaining a healthy environment. Interestingly, a number of firms are finding that reducing environmental impact means reducing waste, and reducing waste ultimately leads to greater profit.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.5 - Discuss the impact that improved transportation has upon land values and economic development.

39. Explain the relationship between the political process and transportation.

ANSWER: The initial construction of nearly all transportation infrastructure and its maintenance is supported by the government (with the exception of freight rail service, which is largely privately funded). Transportation is key to economic growth and prosperity and impacts all elements of business. Additionally, transportation infrastructure is beyond the ability of any one industry to fund and maintain. To keep industry from acting opportunistically and avoid market failures, the government is also involved in establishing policy and regulation with respect to transportation safety and organization.

The government involvement in transportation may lead to certain drawbacks for some parts of the public. For instance, through the right of eminent domain, if government decides that a certain route is important to societal transportation of goods, the government can seize personal property.

The transportation network is also important for national defense. The system of national highways mean that the government can quickly mobilize armies from one side of the country to another during a time of conflict.

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Chapter 02: Transportation and the Economy The maintenance of the existing transportation infrastructure has become a major issue in the st 21 century because of competing demands for public funds such as medical care and national defense. The current situation is a major challenge for future economic expansion. In addition, there is a need for additions or improvements to the infrastructure.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Historical Significance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.4 - Appreciate the historical role of transportation from an economic, social, and political perspective.

40. How does transportation play a major role in a country‘s national defense?

ANSWER: Transportation plays a major role in national defense, which has been recognized by governments. The Roman Empire built its great system of roads primarily for military purposes, but they had an overall positive economic impact. Sir Winston Churchill pointed out that transport was the underlying basis for all that could be accomplished in effectively fighting a war. In other words, transportation was a critical ingredient for success on the battlefield. U.S. requirements for national defense have been a major reason for several important transportation projects. As indicated previously, under the Eisenhower administration, enabling legislation was passed for a National System of Interstate and Defense Highways. This highway system was envisioned as being a system of superhighways connecting the states and their major centers within the states, which could enhance our ability to defend against enemy attack.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transport Measurement Units QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 2.7 - Appreciate the function and scope of transportation in advanced and developed economies.

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Chapter 03: Transportation Technology and Systems 1. Transportation management systems (TMS) provide greater _______ and optimize the _________. a. costing; value chain b. regulations; demand chain c. visibility; supply chain d. profits; internet of things ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.1 - Appreciate the critical role of information in transportation management.

2. Supply chains rely on three flows: __________, ___________, and __________. a. regulation; land bridges; demand b. product; money; information c. sight; costs; electronic d. agency; principal; contingent ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

3. To be relevant, information must be up to date and available in a reasonable time frame. What is this called? a. Adaptability of information b. Utility of information c. Usability of information d. Timeliness of information ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

4. Which of the following is NOT an information quality standard? a. Accuracy b. Regulation Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems c. Accessibility d. Timeliness ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

5. The engagement of multiple stakeholders in transportation planning drives the need for: a. a market to control all aspects of transportation. b. a series of often conflicting programs driven by politics. c. timeliness of data. d. multidirectional information flows across a network.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.4 - Describe and differentiate between planning, execution, and performance management tools.

6. Transportation management systems (TMS) execution capabilities assist transportation professionals in improving decisions about which activities? a. Modes that would optimize schedule b. The ability to influence carriers c. Dependence upon competitive transportation d. Transit-related issues ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.4 - Describe and differentiate between planning, execution, and performance management tools.

7. From the planning perspective, what support activities does a TMS include? a. Transferability b. Accuracy c. Carrier selection Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems d. Accessibility ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.4 - Describe and differentiate between planning, execution, and performance management tools.

8. Typical TMS execution functionality includes which of the following? a. Load planning b. Mode and carrier selection c. Regulations d. Load tendering ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

9. Various studies indicate that using a TMS helps an organization reduce freight costs by what percentage? a. 1% b. 5% to 15% c. 20% to 30% d. 100% ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

10. Global trade management software is helpful with: a. cross-border business. b. private sector investment. c. financial return. d. port congestion.

ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.6 - Discuss the critical issues in transportation software selection and implementation.

11. Best of breed solutions refer to which of the following? a. Facilitation of trade movement b. Software applications from leading providers c. Private industry versus public industry transportation movements d. Long term entitlements ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.6 - Discuss the critical issues in transportation software selection and implementation.

12. Software as a service (SaaS) is also called a what? a. Virtual private network b. Legitimate collection tool c. Pay as you go method d. Development option ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.6 - Discuss the critical issues in transportation software selection and implementation.

13. Which of the following is a reason the transportation industry needs to think about sustainable operations? a. The Federal Motor Carrier Safety Administration b. Highway trust fund c. Cost savings d. Amount of fuel used per year ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Equipment Technology Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

14. Which of the following is a trucking equipment innovation that can improve fuel efficiency? a. Trailer skirts b. Advance Freight Monitoring c. Internet of Things (IoT) d. Autonomous Transportation ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

15. The ocean shipping industry has begun to use what type of fuel to improve emissions? a. Methane b. LNG c. Gasoline d. MFO ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

16. Electronic logging devices (ELD) have been mandated in the United States to: a. close the loop on most supply chains. b. make US carriers compliant with UN regulations. c. improve safety and more accurately log driver hours. d. reduce costs.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

17. Canadian Pacific is field testing what type of locomotive that can eliminate emissions from freight trains? a. Nuclear powered b. Steam powered c. Hydrogen fuel cell-powered d. Drones for delivery ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

18. Which of the following is a benefit of TMS? a. Increased expedited order costs b. Higher administrative costs c. Decreased load consolidation d. Reduced expedited order costs ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

19. Efforts are underway to take many of the routine operator tasks in transportation and: a. turn them over to computers. b. have them deregulated. c. delegate them to the states funded with block grants. d. turn them over to the Department of Homeland Security.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems sustainability, safety, and cargo security.

20. What program or agency collects cargo theft data to inform the community about the crime? a. The Coast Guard (CG) b. Uniform Crime Reporting (UCR) c. The Special Forces (SF) d. The Federal Bureau of Investigation (FBI) ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

21. What is one reason autonomous transportation makes sense for the trucking industry? a. Statutory law b. Sustainability c. Commonality among trucks d. High driver turnover ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Emerging Technologies QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.8 - Identify emerging technologies that will spur transportation service innovation.

22. To ensure actionable knowledge readily flows from shippers, carriers, and customers, information must have what chief attributes? a. Accuracy, accessibility, reliability, relevancy, timeliness, and transferability b. Accessibility, timeliness, value, relevancy, and transferability c. Accuracy, reliability, usability, accessibility, value, and timeliness d. Accuracy, accessibility, relevancy, timeless, transferability, usability, reliability, and value ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

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Chapter 03: Transportation Technology and Systems

23. Necessary visibility and performance management functionality include which of the following? a. Load tendering b. Appointment scheduling c. Performance analysis d. Document creation ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Software QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.4 - Describe and differentiate between planning, execution, and performance management tools.

24. Key TPS planning support capabilities include which of the following? a. Freight bill auditing b. Performance analysis c. Document creation d. Mode and carrier selection ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Software QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.4 - Describe and differentiate between planning, execution, and performance management tools.

25. AI makes it possible for machines to do what? a. Learn from experience b. Adjust to new inputs c. Perform human-like tasks d. Increase equipment down time ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Emerging Technologies QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 3.8 - Identify emerging technologies that will spur transportation service innovation.

26. What three flows do supply chains rely upon?

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Chapter 03: Transportation Technology and Systems ANSWER: Supply chains rely upon three flows: product, money, and information.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Software QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

27. Information must display which characteristics to ensure knowledge flows within a transportation network?

ANSWER: To ensure that actionable knowledge readily flows among shippers, carriers, and customers, information must display a variety of key characteristics. Chief among these attributes are accuracy, accessibility, relevancy, timeliness, and transferability. Also important are usability, reliability, and value.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

28. What is meant by information reliability?

ANSWER: The information contained in transportation reports and transaction data sets must come from trustworthy internal and external sources.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

29. What does a transportation management system accomplish?

ANSWER: The planning and flow of materials across the supply chain are handled by a Transportation Management System (TMS).

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Software QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.3 - Understand the capabilities of transportation software.

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Chapter 03: Transportation Technology and Systems

30. What is the meaning of multidirectional flow?

ANSWER: Information must flow seamlessly among a company, its suppliers, its transportation service providers, and its customers. Information sharing promotes integrated decision making and process synchronization.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

31. What key characteristics must information display?

ANSWER: Accuracy Transportation information must depict reality. A true picture of freight status and location that is free of errors facilitates logical decision making. In contrast, decisions based on inaccurate information can lead to delivery delays, inventory shortages, and unhappy customers.

Accessibility Accurate transportation information must be available to supply chain professionals who have a legitimate need for it, regardless of their role, location, or employer. Gaining accessibility to needed information can be difficult because transportation data often are dispersed among multiple companies, locations, and information systems.

Technical barriers must be overcome to ensure systems connectivity and good information flows.

Relevancy Transportation professionals must have access to pertinent information for analysis and decision making. Irrelevant data and unnecessary details must be avoided as they hide important details, waste time, and distract decision makers.

Timeliness To be relevant, transportation information must be up-to-date and available in a reasonable time frame. Timely data flows from a highly synchronized information system will allow you to monitor network conditions and respond quickly with corrective actions to avoid additional problems.

Transferability Information also needs to be transferred quickly between locations and systems in the transportation network to facilitate accessibility and timeliness. Hence, information must reside in electronic formats that can be readily transmitted and converted.

Usability Information is useful only if it can drive effective decision making. Up-front efforts must be made to define information requirements and capture appropriate data. This will avoid the time and costs of capturing extraneous data that will not be used by transportation decision makers. Also, information is only usable if it can be seamlessly shared and translated from one format to another with no discernible loss of data.

Reliability The information contained in transportation reports and transaction data sets must come from trustworthy internal and external sources. The data must be accurate, unaltered, and reasonably complete to support the intended uses. When incomplete or estimated data is provided, a clear explanation of the missing values and assumptions is needed so that a decision maker‘s analysis can be adjusted accordingly.

Value Achieving these seven quality standards is neither an easy nor a cost-free proposition.

The hardware and software needed to capture and disseminate transportation data can be expensive, though costs are coming down thanks to innovations like cloud computing.

Transportation professionals must target information technology investments that enhance knowledge and generate tangible benefits.

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Chapter 03: Transportation Technology and Systems POINTS: 1 DIFFICULTY: Hard REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.2 - Explain transportation information requirements.

32. What is a transportation management system (TMS)?

ANSWER: The planning and flow of materials across the supply chain are handled by a Transportation Management System (TMS). The core set of business needs handled by a TMS include: routing and rating, executing the shipment across multiple modes, tracking and tracing loads, and freight settlement. This simple booking, execution, and payment perspective focuses on freight management, but a TMS can be much more than a transaction-focused tool. Leading edge TMS suites provide hybrid planning–execution–evaluation capabilities and a wide array of functionality to generate numerous benefits across the entire shipping process.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

33. What are the decision support capabilities of a transportation management system (TMS)?

ANSWER: As the capabilities and scope of a TMS expand, the software moves from being a routine decision support tool to a much more integrative system. It provides greater decision support for strategic, tactical, and operational planning, as well as delivery execution, in-transit visibility, and performance evaluation.

The planning capabilities of TMS assist supply chain managers with pre-shipment decisions related to network design, fleet planning, rate analysis and contracting, mode and carrier selection, and routing and scheduling. The optimization capabilities of TMS allow managers to assess rapidly all possible delivery options versus the hours that it would take to develop manually a transportation plan that considers only a finite number of options. Up-to-date information from the organization‘s warehouse management system (WMS), demand forecasts, and customer orders can be used to make more effective transportation decisions.

TMS execution capabilities help transportation professionals improve decisions about transitrelated activities. The TMS should enable managers to interface with order management and WMS applications and quickly identify transportation needs based on order size, origin, destination, and service requirements. By automating many of these execution activities, a TMS helps an organization reduce errors and delays, improve accountability and visibility, and limit deviation from standard operation procedures. The result will be lower costs and higher quality delivery processes.

A TMS makes it easier to have freight visibility across the transportation network so that everyone involved, including the customer, knows exactly where the shipments are at any Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems time. Transportation professionals can use TMS-driven visibility to monitor freight movement progress, environmental conditions inside the container, and estimated arrival time versus the commitment made to a customer. If alerted to a potential problem or delay, the transportation professional can use this knowledge to take corrective actions.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

34. What are some functional aspects of a transportation management system (TMS) for planning and support capabilities?

ANSWER: Routing and scheduling: Proper planning of delivery routes has a major impact on customer satisfaction, supply chain performance, and organizational success. TMS software uses mathematical models and optimization routines to identify feasible routes that meet service constraints. Typical TMS output includes a detailed schedule of the routes, cost analysis, and route maps.

Mode and carrier selection: A TMS identifies the most appropriate mode and carrier in terms of efficiency and timing. Using the organization‘s contracts and routing guide criteria, the system can pinpoint the best choices based on shipment.

Load planning: Effective preparation of safe, efficient deliveries can be accomplished via TMS load optimization programs. Based on product dimensions, loading requirements, and equipment capacity, the TMS software determines how shipments should be arranged in the container or on a pallet. The result is reduced damage risk and improved cargo space utilization.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

35. Transportation management systems provide what type of benefits?

ANSWER: A widely cited and highly desirable advantage offered by a TMS is cost savings that increase return on investment. Various studies indicate that use of a TMS helps an organization reduce freight costs by 6 to 10 percent. Users have attributed the savings to more effective mode selection, better routing, and better procurement negotiations.

By providing transportation professionals with desktop and mobile access to carrier rates and service information, a TMS also provides the ability to make better, faster carrier selection decisions that optimize costs, flows, and delivery. With this access, the freight buyer can quickly choose the best available option.

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Another important reason to use TMS is the dramatic increase in end-to-end transportation network visibility. The TMS organizes relevant information into precise and easy-to- read lists, which equips the transportation professional to make impactful business decisions during critical moments that improve customers‘ experiences.

Increased paperwork accuracy results from automated documentation processes. Key documents are produced using the TMS database of international, regulatory, and multilingual documentation and creating electronic and non-electronic customs filing. This capability helps the transportation professional avoid delays due to missing or incorrect documentation.

Other notable TMS benefits include improved customer delivery performance, greater compliance with regulatory requirements, and stronger data security. Effective TMS suites also integrate effectively with WMS and order management systems to share information and support end-to-end fulfillment processes seamlessly.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

36. What are some function aspects of TMS execution?

ANSWER: Document creation—Freight movement requires a significant amount of documentation, particularly for international shipments. An effective TMS automates document production and customs reporting, helping to ensure that all of the paperwork required to complete a shipment is prepared correctly and presented to the right people at the right time, and in the right format.

Load tendering—For a given origin–destination pair and shipment size, multiple carriers may be available, though at slightly different rates. When the WMS indicates that an order is ready for shipping, the TMS will tender the load to the appropriate carrier.

Appointment scheduling—To avoid facility congestion, equipment delays, and operator inefficiency, organizations use TMS capabilities to automate the scheduling function. Many systems support Internet-based access to the scheduling system where carriers can schedule pickup and delivery times at specific dock locations.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.5 - Articulate the benefits of transportation management systems.

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Chapter 03: Transportation Technology and Systems 37. Explain why software selection is a multifaceted decision.

ANSWER: First, transportation professionals must determine which type of software—planning, execution, and/or performance management—is needed. Additionally, transportation professionals must compare the advantages of commercial software to in-house solutions, choose between single vendor suites and applications from multiple vendors, and consider licensing versus on-demand purchases, among other issues.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.6 - Discuss the critical issues in transportation software selection and implementation.

38. Explain why transportation professionals should focus implementation and operational issues when considering software.

ANSWER: Potentially useful software will become ―shelfware‖ if it is difficult to install, poorly linked to other tools, or too cumbersome to use. Hence, up-front effort must be expended to assess the implementation challenges before making software purchase decisions. Proper training, cultural change, systems interoperability, and data synchronization are keys to success. Two additional SCIS implementation issues are:  

Data Standardization Application Integration

POINTS: 1 DIFFICULTY: Easy REFERENCES: Information Requirements QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.6 - Discuss the critical issues in transportation software selection and implementation.

39. What is one way that over-the-road transportation companies are thinking about sustainability?

ANSWER: One set of trucking equipment innovation focuses on making tractors and trailers more aerodynamic. Efforts to reduce wind resistance and drag can yield valuable fuel efficiency improvements. Aerodynamic devices such as trailer skirts, trailer tails, and gap reducers can lead to fuel savings of 9 percent or more, according to SmartWay. Additionally, the use of low rolling resistance tires can add another 1 percent of savings for a net fuel savings of 10 percent or more.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Essay HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 03: Transportation Technology and Systems STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

40. How is sustainability being discussed by other branches of the transportation industry?

ANSWER: Airline industry—commercial aircraft manufacturers‘ newest generation of aircraft is about 15 to 20 percent more fuel efficient than the previous generation, and new developments can be expected to continue this trajectory, including more fuel-efficient engines, lighter materials, and improved aerodynamics.

Railroad industry—Canadian Pacific is field testing hydrogen fuel cell-powered linehaul freight locomotives. The technology holds the possibility of eliminating emissions from freight train operations.

Ocean shipping industry—The longtime user of oil-fueled engines is responding to tougher international and environmental standards with engines that use liquified natural gas (LNG), a low cost, low emission fuel. At the end of 2021 there are 251 LNG-fueled vessels in operation with 403 more on order by carriers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

41. What are electronic logging devices?

ANSWER: ELDs are among the variety of efforts being made to improve safety. They have been mandated by the U.S. Congress as of December 2017. In its simplest form, an ELD is used to record a driver‘s Record of Duty Status, replacing the paper log book drivers have traditionally used to record their compliance with hours of service (HOS) requirements. The technology is intended to help create a safer work environment for drivers, and make it easier and faster to track, manage, and share records of duty status data accurately. An ELD synchronizes with a vehicle engine to record driving time automatically for easier, more accurate hours of service recording. The goal is to ensure that drivers do not exceed the legal limits for driving, as excessive HOS can lead to fatigue and greater risk of crashes.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

42. In what ways are carriers addressing cargo security?

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Chapter 03: Transportation Technology and Systems ANSWER:

Transportation providers and freight shippers must also take a proactive role in cargo security. To secure cargo, transportation professionals employ a multilayered approach that incorporates the latest technology and fine-tuned basic practices, such as pre-employment background checks, extensive staff training, and validation of driver credentials when tendering loads. Global positioning satellite (GPS) tracking systems, onboard sensors and analytics, and information sharing are three technology-based cargo security initiatives that can be used to combat criminals.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Equipment Technology QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.7 - Recognize the important role of equipment technology in transportation sustainability, safety, and cargo security.

43. Internet of Things (IoT) sensors can be integrated into assets for what reasons?

ANSWER: Internet of Things (IoT) sensors can be integrated into asset tracking solutions for an additional layer of cargo security. The sensors can be used to detect when:    

container locks and seals have been tampered with; container doors have been opened; cargo is present or absent inside the container; and temperature readings inside a container exceed acceptable ranges.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Emerging Technologies QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.8 - Identify emerging technologies that will spur transportation service innovation.

44. What are the various concepts of autonomous transportation, and how will they affect the world of transportation?

ANSWER: Transportation is a labor-intensive business, and operator roles like driving a truck, piloting a ship, or operating a train can be difficult with odd hours, time away from home, and stressful deadlines. That combination can lead to fatigue, poor decision making, and accidents. Also, turnover can be high, particularly among the ranks of truck drivers.

POINTS:

Efforts are under way to take many of the routine operator tasks in trucks, ships, and trains, and turn them over to computers, similar to what is done in the commercial airline industry with autopilot capabilities. Larger, more sophisticated aircraft have multiple autopilot systems that can control almost all aspects of the airplane‘s movement and an auto-throttle system that is able to control the speed of the airplane. On a Boeing 737, the autopilot can be turned on at 1,000 feet above the ground on takeoff. The second autopilot is engaged with the first one to add a layer of redundancy.

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Chapter 03: Transportation Technology and Systems DIFFICULTY: Medium REFERENCES: Emerging Technologies QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 3.8 - Identify emerging technologies that will spur transportation service innovation.

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Chapter 04: Costing and Pricing for Transportation 1. Under transportation regulation, the portion of a tariff that is a payment to a carrier for performing a given transport service is called a: a. price. b. rate. c. demand charge. d. supply charge.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.1 - Understand the relationship between a rate, a price, and a cost.

2. Price is a concept relating to how post-deregulation transportation firms determine and impose charges for their services. Which is a distinguishing feature of this concept of price? a. The amount found in a Tariff Book as payment to a carrier for performing a transport service b. A lawful charge imposed by a carrier on a commodity movement c. The value or level that is determined based on prevailing market forces d. A charge determined primarily by considering a carrier‘s costs only ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.1 - Understand the relationship between a rate, a price, and a cost.

3. What is the difference between pure competition and monopolistic competition? a. Minimal, as the conditions for each are quite similar b. Under pure competition there are many sellers, and the product is homogeneous c. While there are many sellers, there is some differentiation in the product d. Not as great as there are with an oligopoly ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Market Considerations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.2 - Be familiar with the various types of market structures found in the transportation industry.

4. The relevant market structure under deregulation is described by a theory which substitutes potential competition for Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation the active participation of many sellers. What is this theory called? a. The law of supply and demand b. Marginal utility c. Monopolistic competition d. Contestable markets ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Considerations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.2 - Be familiar with the various types of market structures found in the transportation industry.

5. For the theory of contestable markets to work, four conditions have to be met: no barriers to market entry, no economies of scale present, consumer willingness to switch between carriers, and: a. sellers and buyers of such small size that price or supply cannot be influenced. b. existing carriers prevented from responding to new entrants‘ lower prices. c. mutual interdependence between various sellers. d. no one seller controls a significant portion of the market.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Considerations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.2 - Be familiar with the various types of market structures found in the transportation industry.

6. How is the Relevant Market Structure in transportation described? a. By comparing fixed costs with variable costs b. By determining all the areas which the carrier can serve effectively c. By generally describing all possible origin and destination points for each commodity d. By identifying the relevant market area for one commodity moving between two points ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Considerations QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.3 - Gain knowledge of the impact of transportation prices on the relevant market area for a product.

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Chapter 04: Costing and Pricing for Transportation 7. There are two separate concepts in Cost of Service pricing. What are they? a. Head haul and extent of competition b. Commodity and density c. Prices based on either average or marginal cost d. Competition and direction of travel ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

8. The type of cost created from a situation where the production of one service necessarily entails the production of another service is known as a: a. separable unique cost. b. common cost. c. fixed universal cost. d. variable general cost.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

9. Which of the following problems is raised by the use of Common Costs regarding the Cost of Service Pricing, particularly the Average Cost approach? a. Rates based upon average or fully allocated cost make 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 widespread geographic operations. d. All transport firms have significant difficulty with cost concepts due the very nature of their operations.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

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Chapter 04: Costing and Pricing for Transportation

10. Value of Service Pricing is also called: a. charging a rate which includes a high profit. b. charging what the traffic will bear. c. charging a price which favors one mode over another. d. charging a rate that has shown that shippers will use it to move their traffic.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

11. Value of Service Pricing is based on the concept which states: a. shippers should pay rates high enough to ensure 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.

ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

12. Which is correct regarding Value of Service Pricing? 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.

ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

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Chapter 04: Costing and Pricing for Transportation

13. Third degree price discrimination is: a. rarely prosecuted, illegal, and misdemeanor versus a felony as defined by the Surface Transportation Board Act. b. charging different prices to different buyers who use the same commodity or service. c. permissible only when the buyer has requested rebates. d. the least serious type of discrimination as versus first degree.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

14. Three necessary conditions must be met before a seller can practice third-degree price discrimination. The conditions are: buyers must be separated into groups or submarkets according to their elasticities of demand, the seller must possess some degree of monopoly power, and 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.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

15. Which type of rate applies to common practice in bulk chemical truck moves and air charter movements? a. Differential Rates b. Terminal-to-Terminal Rates c. Per-Mile Rates d. Local Rates ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Pricing in Transportation Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

16. Which type of rate applies to or from whole regions, rather than points within a region? a. Joint b. Local c. Group d. Incentive ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Pricing in Transportation Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

17. The basic types of rates are class, exception, and: a. mileage. b. commodity. c. standard. d. discount.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

18. What type of rate is designed so that carriers in particular regions can depart from the product scale system? a. Commodity rates b. Milage rates c. Incentive rates d. Exception rates ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

19. Carrier pricing decisions fall into three categories. The categories are setting prices for a new service, modifying prices over time, and: Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation a. responding to price changes. b. reacting to government policies. c. anticipating future market conditions. d. changing prices in response to government instruction.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

20. What is a social responsibility price? a. A price meant to skim off the most profitable traffic b. A means to forgo sales and profit c. A price which allows a carrier to enter a new market d. A means that allows the carrier to transport only that traffic of the shipper that the carrier feels to be profitable ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

21. Which of the following considers the value of the product? a. Stowability and handling b. Product density c. Liability d. Unrestricted entry ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

22. Which of the following character-of-shipment rates generally is loaded by the shipper and moved intact to the destination, where it is unloaded by the consignee? a. Unit-Train rates b. Incentive rates Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation c. Truckload rates d. Less-than-truckload rates ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

23. Cost of service pricing is best defined as: a. pricing based on common costs. b. pricing based on marginal costs or average costs. c. pricing based on minimal costs. d. pricing based on profits.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

24. Product density refers to: a. ratio of weight to volume. b. security and handling. c. loading allowances. d. price indices.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

25. Which character-of-shipment rate provides no discount or rate break for larger movements? a. Unit-Train rate b. Density rate c. Per-Car rate d. Any-Quantity rate Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Special Rates QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.8 - Calculate the costs of both truckload and less-than-truckload freight moves.

26. What was the main objective of deregulation in transportation?

ANSWER: To create market-driven pricing of transportation services free from regulatory intervention POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.6 - Appreciate how transportation rates have changed under deregulation.

27. An oligopoly can be defined as: ANSWER: competition between a few large sellers of a relatively homogeneous product that has enough substitutability (cross elasticity of demand), that each seller must, in pricing decisions, take into account competitors‘ reactions.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Considerations QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.2 - Be familiar with the various types of market structures found in the transportation industry.

28. What is the definition of Value of Service Pricing?

ANSWER: Value of Service Pricing is defined as charging what the traffic will bear.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Value of Service Pricing QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

29. What is meant by stowability and handling?

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Chapter 04: Costing and Pricing for Transportation ANSWER:

Stowability and handling reflect the cost the carrier will incur in securing and handling the product in the vehicle.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

30. Local rates can be described as: ANSWER: Rates that apply to any rate between two points served by the same carrier. They include fullcost factors for pickup, documentation, rating, billing, and delivery.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Rate Making in Practice QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

31. Distinguish between the terms ―rate‖ and ―price‖ as they relate to transportation?

ANSWER: A rate, appropriate to the regulation of transportation, refers to the amount that can be found in a Rate Tariff Book as payment to a carrier for performing a given transportation service, and is the lawful charge for the service. Under deregulation, price is a more appropriate term applying to what transportation carriers charge for their services; price represents the value of services performed based on prevailing market forces.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.1 - Understand the relationship between a rate, a price, and a cost.

32. The theory of contestable markets is offered to identify the relevant market structure for the deregulated transportation environment. Explain the theory.

ANSWER: Explanation is offered for the case of airline deregulation. For deregulation to work, a market structure must closely resemble pure competition. The airline industry appeared to be oligopolistic and would prevent new entrants. Some consensus did exist that the airline industry could perform competitively. This provides the rationale for the theory, which proposes that potential competition be substituted for the active participation of many sellers.

For the theory to work, four conditions have to be met: no barrier to market entry, no economies of scale, consumers would be willing to switch quickly among carriers, and existing carriers had to be prevented from responding to new entrants‘ lower prices.

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Chapter 04: Costing and Pricing for Transportation POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Considerations QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.2 - Be familiar with the various types of market structures found in the transportation industry.

33. Define and discuss Cost of Service Pricing.

ANSWER: 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 allocating 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 on an average of fully allocated costs, it becomes necessary to apportion these costs by some arbitrary means.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost of Service Pricing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

34. Define and discuss variable or marginal cost.

ANSWER: The variable or marginal cost of providing a service should serve as the floor for carrier price. The carrier should be able to recover, at the short-run, related costs of providing a service. Conceptually, if Cost of Service pricing provides the floor for a carrier‘s price, then Value of Service Pricing is the ceiling for a price (profit maximization). However, if the notion is accepted that Value of Service Pricing is based on ―what the traffic will bear,‖ then it can be argued that Value of Service Pricing is also the floor (loss minimization) for carrier prices, rather than the marginal cost of providing the service.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost of Service Pricing QUESTION TYPE: Essay Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

35. Define and discuss Value of Service Pricing.

ANSWER: Value of Service Pricing is the pricing approach of the railroads and to some degree has found its way into the pricing models of the other modes of transportation. The railroads have presented an available model of pricing that has influenced the pricing systems of the other modes of transportation. Value of Service Pricing has been defined or conceptualized in a number of different ways. One definition proposes that it is pricing according to the value of the product. Another identifies it as pricing according to what the traffic will bear. One approach defines Value of Service Pricing as third-degree price discrimination, where the seller sets two or more market prices for two or more separate groups of buyers of essentially the same commodity or service. Similar to third-degree price discrimination is differential pricing, which has the carrier charging different prices to different segments of traffic for essentially the same service; the rate differences cannot be explained by differences in the cost of the service. Users of the carrier services are segmented into groups on the basis of the commodity, time of service, place, or customer.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Value of Service Pricing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

36. Define third degree price discrimination and explain the two necessary conditions before it can be practiced? Does this practice fit any one mode more than any other?

ANSWER: Third-degree price discrimination is where the seller sets two or more market prices for two or more separate groups of buyers of essentially the same commodity or service. Before third-degree price discrimination can be practiced, three necessary conditions must be met.

The first condition is that the seller must be able to separate buyers into groups or submarkets according to their different elasticities of demand, which enables the seller to charge different prices in the various markets. The second condition is that the seller must be able to prevent transfer of sales between the submarkets, so that buyers cannot buy in the lower-priced market and sell in the higher priced market. The third condition is that the seller must possess some degree of monopoly power.

Whatever the definition applied, each commodity moves according to its own unique demand characteristics, and carriers may find value of service or differential pricing attractive for many reasons. However, the modes can experience difficulties with the model. The model fits the railroads and their cost structure, and railroads are very profitable. The pipelines fit the model because they have high fixed costs and much excess capacity, but face limitations due to their limited product and geographic flexibility. The cost structure of the motor, water, and air carriers – a high proportion of variable costs – limits their pricing flexibility under the model.

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Chapter 04: Costing and Pricing for Transportation POINTS: 1 DIFFICULTY: Hard REFERENCES: Value of Service Pricing QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

37. What is the current status of rates under deregulation?

ANSWER: The diminished role of the rate bureau in carrier rate making has resulted in a plethora of individual carrier tariffs. In addition, the greater reliance upon the marketplace to control carrier rates has enabled shippers to greatly increase negotiations, resulting in rate reductions, discounts and contract rates.

The product classification will probably continue for some time and the class rate structure will survive for some time to come. The class rate structure is a benchmark from which, in many cases, negotiated rates are based.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making in Practice QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.6 - Appreciate how transportation rates have changed under deregulation.

38. There are several types of special rates. Choose any five and define.

ANSWER: One pricing system is based on mileage. The rate is based on the total miles the shipment travels and weight may not even be a factor in the charges. In some cases, the rate is based on actual miles traveled, while in other cases the rate is based on the ‗shortest‘ practical distance between the origin and destination.

LTL rates reflect the fact the LTL shipments require several handlings while in transit. Each one of these handlings requires dock personnel, material handling equipment, terminal investment and additional management effort. This is reflected in the cost and the rate. Some LTL shipments can move as a truckload at a lower price since there is no intermediate handling.

Multiple car rates are one method by which a railroad can offer discounts from the single car rate. The cost of moving several cars in a single shipment is proportionally less than the cost of moving each car individually.

Incentive rate is a term applied to a rate which is designed to induce the shipper to load existing movements and equipment more fully. By inducing the shipper to load each vehicle more fully, fewer vehicles are needed and there are fewer moves over time, reducing the carrier‘s cost.

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Chapter 04: Costing and Pricing for Transportation Unit train rates are another type of incentive rate where the railroad transports an entire train load of one commodity such as coal or grain. In some cases, the shipper may even provide the rail cars, further reducing the carrier‘s cost.

Per car or per truckload rates reflect the use by the shipper of the entire vehicle and generally apply from the origin to the destination without regard to commodity or weight.

Any quantity rates do not provide a discount for larger shipments. These rates are normally used with light weight and bulky commodities.

Density rates are based on the weight per cubic foot of the shipment and are used for light and bulky products that use space disproportionably to the weight. This is done to avoid loss of income to the carrier when a light or bulky commodity does not generate sufficient revenue based on weight to offset the carrier‘s cost.

Local rates apply between two points both of which are served by one carrier.

Joint rates apply to a shipment which requires two or more carriers to serve both the origin and the destination.

Proportional rates are a method by which a carrier with an indirect route can compete for business against a carrier with a more direct route. These rates normally only apply to points beyond the carrier‘s own line.

Differential rates normally apply to a carrier‘s route that faces a disadvantage because of longer transit time. These were primarily used by railroads which did not have the shortest route or by water carriers in an effort to offset the slower transit time with lower cost.

Per mile rates are based on the actual miles traveled or, in some cases, the ―practical‖ mileage between the origin and destination. If the carrier uses practical mileage, they will allow them to choose a faster route which could involve the Interstate highways system where speeds are higher but the distance is longer than provided by the most direct route. The shipper only pays for the mileage over the shortest available route.

Terminal to terminal rates normally do not include pick up at the shipper and delivery to the consignee. These rates are most often found in connection with air freight. They may also be used in intermodal shipments where the shipper and consignee have their own tractors and can pick and deliver the trailers themselves.

Blanket or group rates apply to a range of points or a geographic region. This allows producers in that area to be on an equal competitive footing as it relates to freight rates.

Contract rates have become the most widespread type of rates being used, particularly after the 1980 partial deregulation of the motor and rail carriers. Rates governed by contracts are not affected by the carrier‘s tariffs unless the contract so indicates. Contracts may require that an agreed volume must be shipped during the life of the contract in order to qualify for the lower rates.

Duties of the carrier may be specified. These could include any number of non-transportation requirements. In some cases, the contract will require the carrier to provide special equipment.

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Chapter 04: Costing and Pricing for Transportation

Certain rail contracts specify that the shipper must ship an agreed number of cars during a time period or pay the railroad as though they did. This is frequently used on lines that have marginal income to act as an incentive to have the railroad not abandon the line.

Some lower rates offered by the carrier can defer delivery by one, two or three days. This allows the carrier some flexibility in equipment scheduling while providing the shippers with a cost savings and a predicable service. This type of ratemaking is most often used by the airfreight companies.

Corporate volume rates may contain a discount or other incentive which is based on all the business done by the corporation and its subsidiaries with a given carrier. This recognizes the fact that many large corporations conduct business through a variety of firms but control rests with the parent firm.

Many carriers provide shippers with discounts which are deducted from the transportation charges or from the rate itself. These discounts are normally reflected as a percent to be deducted from the base rate. These discounts may be subject to certain restrictions.

Loading and unloading allowances are granted to shippers by LTL carriers when these companies perform the work which would normally be done by the carrier‘s personnel.

Aggregate tender rates are given as an incentive for the shipper to tender two or more shipments to the same carrier at the same time. The reduction in the rate offered by the carrier reflects the reduced cost the carrier enjoys when picking multiple shipments at the same location.

Freight All Kinds (FAK) rates are also called all commodity rates. The rate applies to all commodities that the customer ships and is very useful for firms that ship a wide variety of goods.

Released rates reflect that the shipper has agreed to accept a lower than actual value for their product in the event of loss or damage. Since the carrier is not liable for the full value of the products, they can offer a lower rate to the shipper, reducing the shipper‘s cost.

Empty haul rates are usually for transporting the shipper‘s empty equipment to the point of next loading.

Two or Three way rates are those rates which apply for either round trip or a triangular move where the carrier is assured of few if any empty miles between loaded moves.

Spot market rates are something new since deregulation. Carriers are now permitted to make ―on the spot‖ rates to adjust for excess capacity or fill idle equipment. Since service cannot be ‗stored‘, it is in the carrier‘s best interest to sell the unused capacity at a discount.

POINTS: DIFFICULTY: REFERENCES:

Menu pricing also reflects the changes under deregulation. Carriers have ―unbundled‖ their pricing, and this allows customers to pick and choose which services they wish.

1 Medium Special Rates

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Chapter 04: Costing and Pricing for Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.8 - Calculate the costs of both truckload and less-than-truckload freight moves.

39. Describe the three categories of the major pricing decisions made by carriers.

ANSWER: First, a decision must be made when setting prices on a new service. This is a difficult decision because it is based on little knowledge regarding market elasticity to prices, and the actual cost of providing the service. Second is the decision to modify prices over time.

Market changes, operating changes, and service changes may require price changes. Of concern is how and when to announce the price changes. Third are the decisions to initiate and respond to price changes. How this decision is made has a substantial impact on market share and profits.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pricing in Transportation Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

40. Explain the difference between less-than-truckload (LTL) and truckload (TL) character-of-shipment rates.

ANSWER: Less-than-truckload (LTL) shipments require several handlings. Each one of these handlings requires dock personnel, materials-handling equipment, terminal investment, and additional communications and tracking effort. A truckload (TL) shipment, on the other hand, is generally loaded by the shipper and moved intact to the destination, where the consignee unloads it. No intermediate handlings are required, nor does it have to be loaded or unloaded by carrier personnel. The direct movement also avoids intermediate terminals. As a result of these factors, larger TL shipments have lower rates than LTL shipments.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Special Rates QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.8 - Calculate the costs of both truckload and less-than-truckload freight moves.

41. What are the most common mistakes in carrier pricing?

ANSWER: Carriers have not had many years of experience in setting and managing prices on a strategic level. However, just like firms in any other industry, they are prone to certain mistakes. The first common mistake is to make pricing too reliant on costs. Although it is important to know the costs of providing a service, many other factors play a role in setting the appropriate price for a market. Competitive factors, customer preferences and values, and government regulations will affect the level at which the price will be most beneficial to the carrier.

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Chapter 04: Costing and Pricing for Transportation The second common mistake is that prices are not revised frequently enough to capitalize on market changes. Under the previous regulatory environment, it was difficult for carriers to change prices because of the requirement of public notice and the burden of proof on the carrier. However, today‘s environment has allowed tremendous freedom and the flexibility for carriers to change prices. Unfortunately, for some carriers, the traditional mentality remains and can prevent a carrier from entering a market or, in some cases, creating a new market.

Setting the price independently of the marketing mix is a third common mistake. The marketing mix, also known as the ―4Ps,‖ consists of product, price, promotion, and place. A carrier‘s product or output is transportation; its promotion is how it creates demand or advertises itself to customers; price is what it charges for its product or output; place is how it delivers its service to customers. All of these interact within a carrier‘s organization to provide access to and, it is hoped, success in current and potential markets. Managing one of these areas independently of the others will result in a suboptimization of the carrier‘s resources and its profits.

Finally, price is sometimes not varied enough for different service offerings and market segments. A ―one price for all‖ mentality does not work in the transportation industry. As previously stated, carriers service multiple markets with differing service and price requirements. Airlines use a concept called ―yield management‖ pricing, a form of Value of Service Pricing, which relates price to the availability of capacity and the willingness of passengers to pay. Charging one price for all services is not going to maximize the profits for the carrier.

Pricing is a complex and challenging process that applies to all business entities. Pricing is also critical to a business‘s competitive advantage, position within its markets, and overall profitability. It must, however, be managed within the context of the carrier‘s overall strategic plan, not independently of it.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pricing in Transportation Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

42. Please explain skimming pricing.

ANSWER: A skimming price is a high price intended to attract a market that is more concerned with quality, uniqueness, or status, and is insensitive to price. For example, pricing for the ticket to space by Virgin Galactic ($250,000) was certainly aimed at those who would be willing to pay a high price because of the limited number of seats. This strategy works if competition can be kept out of a market through high investment costs or firm loyalty.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pricing in Transportation Management QUESTION TYPE: Essay HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

43. Differentiate the three concepts for estimating costs.

ANSWER: Economies of Scale It is said that economies of scale exist if the average cost (cost per unit of output) is a decreasing function of the firm output; that is, the more the firm output, the lower the average cost. Economies of scale can be found in all modes of transportation, but particularly in those modes in which the fixed costs are high. This is because when the fixed costs are high, carriers can lower the average cost considerably by spreading out the high fixed cost to a large number of outputs. Since the average cost is given by the sum of unit variable cost (which is unaffected by output) and unit fixed cost (fixed cost divided by output—which is obviously a decreasing function of output), the average cost is always a decreasing function of the output. However, the extent to which the average cost decreases with output is dependent on the value of fixed cost because the rate at which the cost decreases with output is positively affected by the value of fixed cost (that is, the larger the fixed cost the faster the rate of decrease caused by a unit increase in output—if you are familiar with differential calculus, you can easily verify this claim). For example, the average cost of a motor carrier that operates many terminals can be reduced notably by increasing the number of loads that the carrier handles through the terminals, because by doing so the fixed cost of operating the terminals (which is high) can be distributed to a large number of loads.

On the other hand, the average cost of a carrier that operates one terminal can be reduced only to a limited extent by increasing output, because the fixed cost is small.

Economies of Density This concept is similar to economies of scale, but it is lane specific. It is said that economies of density exist in a given lane (origin–destination pair) if the cost (average cost) of a carrier decreases with the increase of the carrier‘s shipment volume in the lane.

Economies of density typically result from increased capacity utilization in a given lane; that is, the higher the volume in a given lane, the higher the capacity utilization of the equipment used in the lane. Economies of density may naturally exist in a given lane (for example, busy lanes in which substantial shipping demands exist), or can be created by carriers intentionally.

A good example of the intentional creation of economies of density can be found in the airline industry, where many carriers adopt the ―hub-and-spoke‖ network systems. Without the hub-and-spoke system there are a large number of lanes in a network (for example, an airline with 10 serving airports would have (10 × 9)/2 = 45 lanes), making the density of each lane to be very light. But if the airline decides to use one of its serving airports as a hub, the number of lanes in its network reduces dramatically (to nine lanes, which connect the hub to the remaining nine airports), so that within each lane the airline can enjoy significantly higher degrees of traffic density, which results in cost reduction.

Economies of Scope It is said that economies of scope exist if the cost (average cost) of a carrier decreases with the increase of the number of products or services which the carrier provides. Economies of scope can be found in all modes of transportation, but many good applications of this concept can be found in the trucking industry. For example, it has been shown that the operating cost of a motor carrier becomes lower if the carrier requires each vehicle to haul multiple types of products rather than a single type. The basic logic here is that, when a vehicle is hauling multiple (rather than single) items, a number of distinct nonhomogeneous outputs are being produced from the same vehicle, so that joint and Copyright Cengage Learning. Powered by Cognero.

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Chapter 04: Costing and Pricing for Transportation common costs arise, and the presence of this joint cost gives rise to economies of scope, as these costs can be shared by multiple outputs. It has also been shown that a carrier‘s cost becomes lower if the carrier is allowed to service a larger number of lanes in a given network.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Pricing in Transportation Management QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.7 - Determine the strategic role of pricing for transportation firms.

44. How does one determine a class rate?

ANSWER: The procedure for determining a class rate for moving a specific commodity between two points is outlined in Figure 4.9. The first step is to determine the rate base points for the specific origin and destination from the groupings tariff. Next, from the rate basis number tariff, determine the rate basis number for the relevant rate basis points. The class rating for the particular commodity being shipped is found in the classification. Finally, the rate is found in the class rate tariff for the appropriate rate basis number and class rating. The shipping charge for moving a product between a specific origin and destination is determined by multiplying the class rate, which is in cents per hundredweight, by the total shipment weight in hundredweight.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Rate Making In Practice QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 4.5 - Understand the different forms of rates used in transportation.

45. A situation in which a seller sets two or more different market prices for two or more separate groups of buyers of essentially the same commodity or service is known as: a. loss minimization. b. third-degree price discrimination. c. exception pricing. d. Cost of Service Pricing.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Value of Service Pricing QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 4.4 - Be able to explain the differences between cost-of-service and Value of Service Pricing.

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Chapter 05: Motor Carriers 1. What is one of the primary reasons for the growth of trucking after World War II? a. Trucks became larger and faster. b. Shippers liked the door-to-door service which trucks could provide. c. The Interstate Highway System was constructed, which allowed trucks to give faster service over longer distances. d. The railroads gave up on truck type freight and stopped seeking it.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.1 - Understand the development of motor carriers and their contributions to the U.S. economy.

2. What is the primary division between motor carriers? a. Local and long haul b. LTL and Truckload c. Intrastate and interstate d. For-hire and private ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

3. What is a for-hire carrier? a. A trucking firm that provides services to the public b. A trucking firm that does not charge a fee c. A trucking firm that provides services to the industry d. A trucking firm that ships products from their warehouse to stores ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

4. Motor carriers are categorized into two types of drivers: a. Company and owner operators Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers b. Private and owner operators c. Company and private d. Private and truckload ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

5. There is a relatively small amount of capital required to enter: a. the private carriage business. b. the truckload industry. c. the pickup and delivery sector. d. the line haul sector.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

6. In 2021, the U.S. distribution of motor carriers was: a. 91,000. b. 366,658. c. 1 million. d. 1.8 million.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

7. What is the status of competition within the motor carrier industry? a. Only carriers of the same type compete against each other, such LTL versus LTL or TL versus TL carriers. b. For-hire carriers only compete against private carriers. c. The industry is highly competitive, with competition among all carriers as well as with firms such as United Parcel Service and FedEx. Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers d. Truckload carriers only compete with contract carriers.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

8. What is one of the service characteristics of the trucking industry? a. Trucks are built to fit on existing highways. b. Trucks have a speed advantage for shipments less than 800 miles. c. Truck rates are cheaper than rail or air. d. Trucks are easier to load than rail cars.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

9. Which two equipment decisions do TL and LTL carriers need to make? a. Type of trailer and cost of equipment b. Type of trailer and what to haul c. Type of tractor and what to haul d. Type of tractor and type of trailer ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

10. LTL carriers must make the same type of equipment decisions as TL along with deciding: a. what commodities to haul. b. where to deploy this equipment. c. whether to choose line haul or PUD. d. what color to paint the trucks.

ANSWER: b POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

11. The decision as to terminal location: a. is relatively more difficult for trucking than other modes. b. is concerned with whether it is to be a line haul or PUD facility. c. is based on whether it is to serve a truckload or LTL carrier. d. is simpler than other management decisions.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.5 - Identify the different types of vehicles and terminals used in the motor varrier industry.

12. Which agency within the Department of Transportation governs specifications of trucks, such as number of lights, tires, and other operating parts? a. Surface Transportation Board b. National Highway Traffic Safety Board c. Federal Highway Administration d. Federal Motor Carrier Safety Administration ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

13. Which type of truck terminal is not used by LTL carriers? a. Fuel b. PUD c. Break bulk d. Relay ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

14. The trucking industry is characterized as having: a. small investment requirements. b. easy sources of financing. c. high variable and low fixed costs. d. costly government requirements.

ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

15. What is the largest single expense item for trucking firms? a. Fuel and taxes b. Equipment purchases and maintenance c. Labor d. Insurance and management salaries ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

16. ―There are __________ economies of scale in the trucking industry.‖ a. significant b. no major c. management driven opportunities for d. some government suggested ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

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17. The requirements for a commercial driver‘s license are mandated by the: a. Federal Department of Transportation (DOT). b. National Highway Traffic Safety Board. c. Federal Highway Administration. d. driver‘s home state.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

18. Which taxes fund highways? a. Federal income b. Highway user c. State income d. Ton-mile ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

19. All carriers receive a safety fitness rating. Who makes the inspection and determines the rating? a. Surface Transportation Board b. National Highway Traffic Safety Board c. Federal Highway Administration d. Federal Motor Carrier Safety Administration (FMCSA) ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

20. Which of the following is not one of the current issues facing the trucking industry in the future? a. Safety Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers b. Highway construction with its resultant delays c. Technology d. Financial Stability ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

21. The Federal Highway Trust Fund pays for what percentage of construction cost on the interstate highway system? a. 25% b. 60% c. 90% d. 100% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.1 - Understand the development of motor carriers and their contributions to the U.S. economy.

22. Looking at your profit and loss statement, you note that you have operating expenses of $10M and operating revenue of $14M. What is your operating percentage? a. 68.12 b. 71.41 c. 94.73 d. 140.04 ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

23. What type of trailer can be coupled in twos and threes? a. 28 foot b. 40 foot c. 48 foot Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers d. 53 foot ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

24. Private carriers tend to have greater: a. control and flexibility. b. fixed costs. c. labor rates. d. assets.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

25. What are the two main reasons for driver turnover? a. Poor roads and job-hop b. Driver shortage and job-hop c. The Interstate Commerce Commission d. LTL versus TL ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

26. In 2020, motor carriers moved roughly what percentage of the U.S. freight tonnage?

ANSWER: $72.5% POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.1 - Understand the development of motor carriers and their contributions to the U.S. economy.

27. What mode or segment of a mode generates the most severe competition for the for-hire carriers?

ANSWER: Private carriers POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

28. There are several advantages of private trucking. Name any three.

ANSWER: Convenience, flexible operation, greater control, lower transit times, lower inventory levels, reduced damage, reduced transportation costs, reduced inventory levels, advertising, lower driver turnover POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

29. There are at least three types of terminals. Name two.

ANSWER: PUD, break bulk, relay POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

30. What is the reason that the Truck Load market can be considered monopolistic competition?

ANSWER: With the low entrance to market requirements (i.e., capital), individuals can easily obtain equipment and begin operation within a specific geographic region.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Types of Carriers QUESTION TYPE: Subjective Short Answer Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

31. Explain the difference between for-hire and a private carrier.

ANSWER: A for-hire carrier offers services to the general public, while a private carrier normally provides transportation service only to the company which owns the carrier.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Types of Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

32. Explain why there are a number of carriers in the Truck Load sector?

ANSWER: They can transport any commodity they wish, with only household goods and related items being subject to economic oversight. Because of this, the motor carrier industry today consists of many small carriers, particularly in the TL (truckload) segment of the industry. As of 2021, a total of 996,894 for-hire motor carriers were on file with the Department of Transportation. Of these carriers, 91.5 percent operate with six or fewer trucks, and 97.4 percent operate fewer than 20 trucks. This figure supports the small firm composition of the for-hire carrier industry. Keep in mind that many businesses do use their own private fleet (in 2021 there were 813,440 private carriers in the United States).

A further explanation of the large number of small carriers is the limited capital needed to enter the TL industry. A motor carrier can be formed with as little as $5,000 to $10,000 equity, and the balance can be financed with the vehicle serving as collateral for the loan.

However, LTL carriers have terminals that increase the capital requirements and thus add a constraint to entry.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

33. There are several general service characteristics which favor the trucking industry. Name and discuss at least three.

ANSWER: The primary advantage is accessibility, since trucks can go nearly everywhere and serve as the link between shippers and other modes, like air, rail, and water. Urban areas normally do not have direct access to waterways or airports and, unless the shipper and consignee both have rail sidings, direct rail service is not possible.

Speed is another advantage, as trucks can often compete with air less than 500 miles and with rail up to 1,500 miles.

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The smaller cargo carrying capacity of trucks allows for more frequent shipments. The smoother ride of trucks is less likely than other modes to damage shipments and packaging costs may be less.

The motor carrier industry is more customer-or market-oriented than other modes and has been quicker to respond to shipper‘s demands.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.4 - Gain knowledge of the service characteristics of motor carriers.

34. There are three types of terminals which are used by a trucking firm. Define and discuss each type and indicate if they are unique to any one type of trucking firm.

ANSWER: There are three types of terminals. They are: Pickup and Delivery, Break Bulk and Relay terminals.

The Pickup and Delivery is used only by LTL carriers and functions to gather and distribute shipments. Shipments are gathered from various customers, loaded into trailers heading in the direction of the destination. The operation is reversed at the destination. Other functions carried out at this type of terminal are sales, billing, and claims handling.

Break Bulk terminals are only used by LTL carriers and are intermediate to the pickup and delivery terminals. Consolidated truckloads arrive from many locations. The freight is unloaded and sorted by destination. It is then reloaded for the next leg of the journey.

The Relay terminal is used by both LTL and TL carriers to exchange loaded trailers.

Normally the freight on the trailers is not handled and the type of terminal exists because of the maximum number of hours that a driver may operate.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.2 - Be familiar with the different types of firms in the motor carrier industry.

35. Define whether a motor carrier‘s costs are more fixed or variable. Explain your answer.

ANSWER: A motor carrier cost structure is primarily variable, with as much as 70 to 90 percent falling in that category. The primary reason for this is that the motor carrier does not bear the cost of the highways and does not have to maintain them, whether the carrier uses them or not.

Motor carriers can quickly increase or decrease equipment as business changes. The vast majority of carriers do not have terminals to maintain. Most of the carrier‘s cost are directly related to operating expense.

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Labor accounts for as much as 32.7 percent of a carrier‘s expense. Those firms which are non-union can adjust the size of the work force quickly so as to avoid excess labor costs.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

36. What is last-mile delivery?

ANSWER: Last-mile logistics, also called last-mile delivery or last-mile distribution, is a topic that is gaining increasing attention in the motor carrier industry. Last-mile logistics refers to the transportation and fulfilment of orders to consumers with the focus on the last stretch of the supply chain – from the last inventory holding location to the recipient‘s preferred delivery points (Boyer et al., 2009). Because of the large number of delivery points and possible means of performing deliveries, last-mile logistics is a complex and challenging process. For this reason, last-mile logistics is typically the most expensive and inefficient part of many supply chains.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Last-Mile Delivery QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

37. Do motor carriers experience economies of scale?

ANSWER: Generally, they do not. Trailer sizes are fixed and productivity per employee is difficult to change. Drivers can only handle one or two trailers so increases in business normally require adding more equipment and personnel. Larger carriers may experience some economies of scale since they can purchase in larger quantities, but these are minimal.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

38. What is the operating ratio, how is computed, and what does it measure?

ANSWER: The operating ratio is a measurement of operating efficiency. It is computed by dividing the expenses by the revenue and developing a percentage ratio. The operating ratio measures how well a carrier is being managed and how much out of every dollar of income is paid out Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers in expenses. In other words, the operating ratio measures how much a carrier must spend to earn a dollar in revenue.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

39. Discuss the current method of funding for highways and include your opinion regarding its fairness, as it relates to the trucking industry.

ANSWER: Highway users, trucks and automobiles, pay for highway construction, maintenance, and policing through user fees or taxes. These taxes include those on fuel and, for motor carriers, taxes on tires, new equipment, and highway use. The federal government pays 90 percent of new construction and 50 percent of the cost of maintenance.

(The student should take a position based on discussion in the classroom and information in the textbook.)

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.6 - Understand the impact of fuel and labor on the motor carrier cost structure.

40. Several significant issues currently face motor carriers. Pick two, define, and discuss.

ANSWER: Safety is one of the biggest issues, with carriers coming under more scrutiny by the Federal Highway Administration, which enforces the rules related to safety ratings.

Shortage of qualified drivers Drug and alcohol abuse, while appearing to be under control, are still issues for both carrier management and employees.

POINTS: DIFFICULTY: REFERENCES:

Drivers‘ hours of service are undergoing intense review and are likely to be changed. Many trucking firms have built terminals and relay stations based on the current rules. Significant change could be very disruptive and cause dislocations in logistics practices, but financial stability is also a major concern. The largest carriers and those serving niche markets appear to be in satisfactory condition, but mid-level and union carriers are under intense pressure from competitors and shippers. Funding for replacements and improvements could be difficult to obtain.

1 Medium Current Issues

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Chapter 05: Motor Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

41. Discuss the impact of drug and alcohol abuse on the trucking industry. What steps have companies taken to deal with this safety concern?

ANSWER: A major related concern is that of alcohol and drug abuse. It has been estimated that American industry pays $50 to $100 billion for the results of substance abuse in the workplace every year, either for the cost of accidents or losses in productivity.

In response to this problem, the motor carrier industry has begun to move toward drug screening for its employees. Drug and alcohol testing are required in the following circumstances: • As a requirement for employment • As a part of a regular physical exam required of current employees • For ―cause,‖ required after any accident • On a random selection basis Drug and alcohol rules require motor carriers to have an anti-drug program, as well as drug testing that includes random and post-accident testing. All fleets, regardless of size, are required to have a complete program, including random and post-accident testing in place.

These rules apply to the owner/operator as well. Many states have drug-testing programs of their own as well, with which the carrier must comply.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.7 - Be aware of current issues facing the motor carrier industry.

42. Discuss market forces that are shaping the motor carrier industry: ANSWER: Number of Carriers: As of 2021, a total of 996,894 for-hire motor carriers were on file with the Department of Transportation. Of these carriers, 91.5 percent operate with six or fewer trucks, and 97.4 percent operate fewer than 20 trucks. This figure supports the small firm composition of the for-hire carrier industry. Keep in mind that many businesses do use their own private fleet (in 2021 there were 813,440 private carriers in the United States).

Market Structure: When discussing the motor carrier industry, consideration must be given to the commodities hauled. Motor carrier vehicles, both for-hire and private, primarily transport manufactured, high-value products. These vehicles carry more than most of the various manufactured commodity categories. The commodity list includes food and manufactured products, consumer goods, and industrial goods. In addition, these vehicles transport almost all the sheep, lambs, cattle, calves, and hogs moving to stockyards.

Competition: Copyright Cengage Learning. Powered by Cognero.

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Chapter 05: Motor Carriers Motor carriers compete vigorously with one another for freight. With the large number of for-hire motor carriers, rivalry among firms can be intense. However, the most severe competition for for-hire carriers often comes from the private carrier.

Overall, the motor carrier industry, especially for contract carriers, has been market oriented.

Meeting customer requirements has been a common trait of motor carriers. The small size of most for-hire carriers allows them to give individualized attention to customers. As carriers have grown, this close carrier–customer relationship has been strained. However, the responsiveness to customer demands for service still dominates all motor carrier organizations, and shippers expect carriers to respond to their needs.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 5.3 - Appreciate the market forces shaping the motor carrier industry.

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Chapter 06: Railroads 1. In 2013, railroads transported what percentage of all intercity ton miles moved by all modes? a. 3.0 b. 5.2 c. 9.4 d. 17.1 ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

2. Intramodal competition is: a. the joint use of trucks and railroads to serve common customers. b. trucking companies underbidding other modes to secure business. c. various modes seeking to gain market share from other modes. d. a government sponsored activity.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

3. Which is a major reason for the decline in the number of rail companies? a. Mergers and unification occurring in the railroad industry b. Government restrictions on rail ownership c. Loss of business to other modes d. Desire of management to invest in other areas of business ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

4. One of the benefits of a railroad merger is: Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads a. there are fewer grade crossings. b. less frequent interchanges between companies mean faster service. c. cities and towns get back land once used for railroads. d. the STB does not have as many companies to regulate.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

5. What do the railroad systems primarily transport? a. Manufactured goods b. High-value commodities c. Bulk materials d. Small quantities of goods ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

6. The demand for freight: a. originates when the carrier asks for the business. b. starts when the shipper calls the railroad to provide equipment to move a shipment. c. is a derived demand based on the demand for products. d. is based upon government quotas.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

7. The railroads dominate the market for: a. hauling 30,000 pounds or more over 300 miles. b. hauling 60,000 pounds or less under 100 miles.

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Chapter 06: Railroads c. oversize and over-dimension shipments. d. coal and chemicals.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

8. What is one of the strengths of the railroad industry? a. It is not as affected by the weather as are other modes. b. The railroads have large carrying capacity. c. It can move products in both directions. d. Geographical barriers are not as formidable as they are for other modes.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

9. What is the difference between TOFC and COFC service? a. TOFC is slower and cheaper. b. Not all railroads can handle COFC. c. COFC is more costly. d. One method moves the trailer on its wheels and the other moves only the ―box‖ or the container.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

10. Railroad carloadings have declined since 1900. What is the primary reason for the decline? a. Competition by foreign transportation b. Fuel-efficient smaller cars c. Reduction in line trackage d. Larger cars and increasing car productivity ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

11. The basic unit of measurement for railroad freight handling is known as the: a. unit load. b. car load. c. freight load. d. capacity load.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

12. Which type of railroad car has no top, a flat bottom, and fixed sides used for hauling bulk commodities? a. Tank car b. Covered hopper c. Flat car d. Gondola ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

13. Who are the owners of the greatest percentage of rolling stock in use? a. Class I railroads b. Federal government for military moves c. Private car leasing firms and shippers d. Investment and financial firms ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.2 - Gain an understanding of the size and types of firms in the railroad industry.

14. What is the major cost element of the railroad? a. Operation and maintenance of locomotives b. Operation and maintenance of rights-of-way c. Operation and maintenance of railcars d. Operation and maintenance of yards and terminals ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

15. What is an example of rights-of-way costs specifically for the railroad industry? a. Terminals b. Labor costs c. Highways d. Train tracks ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

16. Railroad per unit costs decline as traffic increases. What is the reason for this cost behavior? a. A high proportion of variable costs in the cost structure b. A low proportion of fixed costs in the cost structure c. A large proportion of fixed costs in the cost structure d. A limited capital investment by the railroads ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

17. What was the purpose of the legislation which created Amtrak? a. It relieved railroads of the responsibility of providing passenger service. b. It allowed the government to provide service without concern for profit. c. It allowed the states to take over commuter service. d. It allowed the railroads to get rid of track that was only used by passenger trains.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Financial Plight QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

18. Intermodal traffic decreased between 2015 and 2020 by what percentage? a. 1.5 b. 1.9 c. 2.5 d. 3.5 ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.7 - Understand the importance of intermodal carloadings on the growth of the railroad industry.

19. Railroads are: a. more energy efficient than most other motor carriers. b. more likely to haul energy-producing materials than other modes. c. not as energy efficient as most other modes. d. buying more energy-efficient locomotives.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

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20. When did scheduled common carrier freight and passenger service begin in the U.S.? a. 1830 b. 1868 c. 1909 d. 1918 ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

21. What is the standard track gauge in the U.S? a. 2 feet 5 inches b. 3 feet 2 inches c. 4 feet 8.5 inches d. 4 feet 10 inches ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

22. In 2020, what was the largest carload commodity group hauled by the railroad systems? a. Coal b. Mixed shipments c. Farm products d. Non-metallic minerals ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

23. How many Class 1 rail companies are there?

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Chapter 06: Railroads a. 5 b. 7 c. 66 d. 78 ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.2 - Gain an understanding of the size and types of firms in the railroad industry.

24. What is one of the current issues facing the railroad industry? a. Low fuel costs b. Energy surplus c. Legalization of medical and recreational use of marijuana in many states d. Great customer service ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

25. How many rail mergers have occurred in the last 30 years? a. 15 b. 20 c. 28 d. 36 ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.2 - Gain an understanding of the size and types of firms in the railroad industry.

26. What is local drayage? a. The elimination of the ICC and the transfer of all economic rail regulations to the Surface Transportation Board b. A term used when referencing the deregulation of the railroad industry in the 1980s Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads c. The extent to which equipment and service problems persist d. Pickup and delivery of trailers and containers in conjunction with a line-haul rail movement ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

27. Who is the largest single customer of some railroads? a. FedEx b. DHL c. Walmart d. UPS ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

28. The major cost element borne by the railroad industry is the: a. rolling stock. b. fuel costs. c. rights of way. d. insurance.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

29. Define Intramodal.

ANSWER: POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

Intramodal means competition within modes.

1 Medium Industry Overview Subjective Short Answer

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Chapter 06: Railroads HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

30. What are mergers called that provide more effective intermodal and intramodal competition?

ANSWER: End-to-end POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

31. Name the top four commodities transported by railroads.

ANSWER: They are coal, farm products, chemicals, and transportation equipment.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

32. What are the three major classifications of labor on railroads?

ANSWER: Operating, non-operating craft, and non-operating industrial POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

33. Standard track gauge is defined as?

ANSWER: The distance between the inside edge of the running rails of a rail track POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction QUESTION TYPE: Subjective Short Answer Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

34. As of 2020, what was the return on investment in the rail industry?

ANSWER: 11.23 percent POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

35. Rail is considered an oligopolistic market structure because: ANSWER: a small number of interdependent large sellers and barriers to entry exist.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.1 - Appreciate the contributions of the railroad industry to the development of the U.S. economy.

36. Rails to Trails Conservancy has created how many miles of hiking trails?

ANSWER: 10,000 POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.2 - Gain an understanding of the size and types of firms in the railroad industry.

37. What types of mergers occurred in the rail industry? What has been the result of this activity after the passage of the Staggers Rail Act? ANSWER: The first mergers were mergers of rail companies who had lines that were side-by-side. This allowed railroads to eliminate duplication of parallel routes and strengthen financial position.

Later, end-to-end mergers allowed carriers to extend their route structure to provide more effective intermodal and intramodal competition.

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Chapter 06: Railroads Customer service and reliability can be improved by these mergers. With the end-to-end mergers, the customer has one company that is responsible for the shipment. Additionally, cost should improve as many of the operating costs, such as car switching and clerical costs or record keeping, can be bought under control. Although there is less competition, the cost should be lower, as there is less duplication.

After passage of the Staggers Rail Act, the merger trend accelerated. Because of these mergers, there are now only four major railroads.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.3 - Discuss the relevance of intermodal and intramodal competition in the railroad industry.

38. The railroads can claim a number of service advantages, such as a large carrying capacity, assumption of liability for shipments, and an increased use of technology. However, there are also a number of disadvantages. Please describe the rail disadvantages.

ANSWER: Rail service is constrained by fixed rights-of-way. The rail network is thus not as extensive as the roads. The constrained right-of-way limits the degree of service completeness. It is impossible to provide door-to-door service unless both shipper and receiver have rail sidings.

In many cases, the movement of goods must be completed by another mode of transportation such as truck. Declines in total track mileage make the railroad industry less service complete and more dependent on other modes of transportation for movement completion.

The rail system provides a nationwide network of service. However, carriers are regionally located and tend to be able to complete national shipments through interchange between carriers. The multiple handling of shipments creates delivery delays, as well as a higher incidence of loss and damage. Rail is primarily a long-haul mode, making it difficult to provide cost-effective short-haul service. However, in the future the goal is to expand service into short-haul markets and selected lanes.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

39. Abandonments have reduced the total track mileage by over 50 percent since 1929. Why did these abandonments occur? What have been at least two outgrowths of this abandonment trend? Does any government agency oversee railroad abandonments?

ANSWER: Overexpansion coupled with a decline in rail shipments and the cost effectiveness of truck transportation left extensive amounts of excess trackage in many areas. Faced with Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads significant amounts of under-utilized assets, the railroads had to abandon large portions of rail trackage to remain competitive. Parallel and overlapping routes, therefore, have been eliminated whenever possible.

In the late 1950s, the government opened the Interstate Highway System. This increased the cost effectiveness of trucking service, which caused shippers to use motor carriers. To compete effectively with trucking companies for time-sensitive traffic, railroads had to focus on efficient routes.

Once the railroad companies abandoned the tracks, they sold the rails and ties to scrap dealers. They received as much as $10,000 per mile or reused the materials elsewhere.

The ICC, and later the STB, regulated abandonments, but changes in the law made it much easier for the railroad industry to close unprofitable lines. Not all the lines were scrapped, as regional and short line operators took over some of this property.

New developments, such as unit trains carrying one commodity like coal or grain from shipper to one consignee, helped the railroads operate profitably. As more and more trains were concentrated on fewer and fewer routes, overhead costs were spread over more businesses. Another advantage of abandonments was the Rails to Trails program, where the abandoned rails were turned into extensive networks of biking and walking paths.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.2 - Gain an understanding of the size and types of firms in the railroad industry.

40. Piggyback service was designed for increased service levels to intermodal customers. What are the characteristics of this traffic?

ANSWER: Intermodal traffic has been increasing about 20 percent per year.

This intermodal traffic, when the modes are rail and truck, are called trailer-on-flatcar (TOFC) and container-on-flatcar (COFC) service.

TOFC service transports highway trailers on railroad flatcars. It combines the line-haul efficiencies of the railroads with the flexibility of local motor pickup and delivery service.

On-time deliveries, regularly scheduled departures, and fuel efficiency are the major reasons for the present growth and future potential of TOFC service. For example, a 100-car train (which places two trailers on each flatcar) is more economical to run than 200 trucks over the road. Fuel is saved and railroad economies of scale are realized. Traffic congestion, road damage, and maintenance and repair costs are all reduced because of the reduction in the number of trucks out on the highways.

The railroads realized the necessity of improving the TOFC and COFC service to compete effectively with motor carriers. To facilitate this, the rail providers have made improvements such as including terminal facilities for loading and unloading, and changes in the railcars, trailers, and containers. However, the changes have not stopped here. The railroads have invested a significant amount of money recently in improving right-of-way and structures to Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads improve service by preventing delays.

Intermodal movement of trailers and containers grew rapidly during the 1980s. This growth was stimulated by the advent of double-stack containers used in international trade. Also, the railroads have placed new emphasis on their intermodal business after a number of years of doubting its profitability.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.7 - Understand the importance of intermodal carloadings on the growth of the railroad industry.

41. The railroad‘s short run cost structure consists of a large proportion of indirect fixed costs resulting from the mode‘s investment in long-lived assets. Explain the fixed elements of the mode‘s cost structure.

ANSWER: The major cost element is the operation, maintenance, and ownership of rights-of-way. The rights-of-way are the actual track and strips of land the track sits on.

Rights-of-way require a significant initial capital investment and subsequent annual maintenance costs. Another element fixed cost element are the terminal facilities. Terminal facilities include freight yards, terminal areas, and sidings. Passenger stations may also be included. The investment in rail transport equipment is another major cost element. This includes investment in locomotives and various types of rolling stock.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

42. Discuss the legislative reform which has occurred since 1973. How did each new law impact the railroad industry?

You need not include the legislation which started Amtrak.

ANSWER: The Regional Rail Reorganization Act of 1973 (3R Act) attempted to maintain rail freight service in the Northeast by creating the Consolidated Rail Corporation (Conrail), which was formed from six bankrupt northeastern railroads. The act also created the United States Railroad Association (USRA) as the government agency responsible for planning and financing the restructuring. By 1980, the federal government had granted Conrail more than $3.3 billion in federal subsidies to cover its operating expenses. Conrail proved to be very successful and was ―spun off‖ to the public with the sale of its stock in 1987. Conrail‘s management was able to rationalize the excess track while preserving and improving service.

After a failed attempt by CSX to takeover Conrail, CSX and the Norfolk Southern Railroad agreed to split Conrail between them and paid collectively over $10 billion for the property.

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Chapter 06: Railroads The Railroad Revitalization and Regulatory Reform Act of 1976 (4R Act) was the first attempt to deregulate the industry since the railroads came under regulation in 1887. The goals of the 4R Act were to help the railroads obtain funds for capital investment and to allow the railroads more freedom concerning decisions on mergers, abandonments, and rate making. Although the 4R Act was an attempt to deal with regulatory problems, the ICC‘s interpretation of the act negated many of its positive aspects and in some cases actually increased rail regulation.

The Staggers Rail Act did a great deal to enable the railroads to help themselves and avoid further deterioration of the industry, although they still face financial challenges because their return on equity is very low (about three percent) compared to many other industries.

However, many railroad managers are optimistic that the industry will be able to keep its profitability and financial health if the Staggers Rail Act is not altered to introduce more regulatory control and is allowed to continue working. Many railroads continuously improved their financial situation during the 1980s.

The ICC Termination Act of 1995 eliminated the ICC and transferred economic rail regulation to the Surface Transportation Board (STB), which is part of the DOT. The STB has taken a relaxed posture on rail regulation, sometimes to the dismay of the shippers, so the railroads are now subject to market pressures more than economic regulations. It is interesting to observe that the STB faces some of the same challenges faced by the ICC (i.e., rail consolidation, larger shipper bargaining power, capitalization, etc.).

POINTS: 1 DIFFICULTY: Hard REFERENCES: Financial Plight QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

43. After the passage of the Staggers Rail Act of 1980, the railroads improved service to their customers. Describe these areas of improvement.

ANSWER: The Staggers act increased competition among the rail companies by allowing rate making freedom. Since the passage of the Staggers Rail act the railroads have shown increases in customer service levels. There has been an improvement in safety, with declines in accidents, injuries, and fatalities. A survey of rail shippers showed that 86 percent of the respondents approved of government actions allowing rate-making freedom for the railroads. Intermodal traffic increased by 319 percent between 1980 and 2012. Train accidents per million trainmiles declined by over 79 percent from 1980 to 2012.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Financial Plight QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

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Chapter 06: Railroads

44. What is a ―unit train‖ and what are the advantages and disadvantages of unit trains?

ANSWER: The unit train is a train that specializes in the transport of only one commodity, usually coal or grain, from origin to destination.

The unit train evolved from the rent-a-train concept for the movement of goods. Many times a shipper, who owns cars, will rent the train to another shipper for a particular period of time.

For example, a typical coal unit train move would involve the transportation of 10,000 tons of coal in 100 hopper or gondola cars, each with a 100-ton capacity. The movement would be directly from the mine to an electric power-generating station with no stops in transit.

Because of the single commodity nature and the need to maintain regularly scheduled movements, empty backhauls occur. However, this drawback is offset by the high revenueproducing capabilities of the unit train resulting from the improved overall car utilization.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

45. Discuss the history and current situation of alcohol and drug abuse in the railroad industry.

ANSWER: The problem of substance abuse can be brought on by the very nature of railroad work. Long hours, low supervision, and nights away from home can lead to loneliness and boredom, which can then lead to substance abuse. Because of this situation, the railroads have been dealing with the problem of substance abuse for a century.

To deal with this problem, the railroad industry has attempted to identify and help employees with substance abuse problems. The industry has established employee assistance programs (EAPs) that enable these troubled employees to be rehabilitated.

Railroad EAPs have proven to be very effective. A recent FRA report found that the rate of successful rehabilitation has risen by 70 percent. The success of these programs depends largely on support from rail workers and all levels of management.

A current issue facing railroads is that numerous states have legalized the medical and recreational use of marijuana. While tests have been developed to detect alcohol and drug presence in employees‘ blood, no such reliable test is available today for testing the presence of marijuana in the bloodstream. The transportation industry faces the same issue with vehicle operators. Alternative tests, like functional ability testing, might need to be employed.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

46. Discuss the current use of technology in the railroad industry.

ANSWER: To become more efficient and consequently more competitive, the railroad industry is becoming a high-tech industry. Computers are playing a large role in every mode of transportation, and the railroads are no exception. A line of ―smart‖ locomotives is being equipped with onboard computers that can identify mechanical problems, and the legendary red caboose was phased out by a small device weighing 30 pounds that attaches to the last car of the train. This electronic device transmits important information to engineers and dispatchers alike, including information about the braking system. Other applications of computer technology are as follows:     

Positive Train Control Systems (PTCS): A joint venture between the United States and Canada that will use computers to track the flow of trains through the entire rail system and alert operators to potential accidents or other mishaps Rail yard control: Computer control of freight yards that is used to sort and classify as many as 2,500 railcars a day Communications and signaling: Provides quick and efficient communications among dispatchers, yard workers, field workers, and train crews Customer service: By calling a toll-free number, customers can receive information on the status of their shipments, correct billing errors, and plan new service schedules Radio Frequency Identification (RFID): Tags to track equipment and shipments and improve visibility

The role of high technology and computers will continue to expand and increase the ability of the railroads to provide progressively higher levels of customer service.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

47. Briefly explain the significance of the role of smaller railroads.

ANSWER: The small and regional carriers often have to operate at a cost disadvantage compared to the large rail system carriers, which have the advantage of economies of scale. However, the smaller rail companies have some advantages, given that they are more flexible and adaptable in meeting the needs of their customers (shippers). They are usually not unionized, which also helps make them more flexible. Another possible advantage is local ownership of the rail companies and the related willingness to accept lower returns and/or pay closer attention to customer needs to promote regional economic development.

It should also be noted that some local and state governments have provided financial assistance, primarily for infrastructure improvements, for the formation of short lines that have come into being in recent years. This community support is usually based upon a need to continue the rail service for the economic benefit of existing and potential new businesses.

Although motor carrier transportation has often filled the need of smaller communities for Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads transportation service, rail service may be viewed by some communities as a necessary ingredient for the economic viability of the area. Consequently, many communities have had the advantage of continuing rail service that would not have been possible otherwise.

The large Class I railroads have been frequent targets for criticism about the service they provide to their customers. The smaller lines are usually viewed in a more favorable light because of their responsiveness at the local level. However, the small and regional rail carriers are usually more vulnerable if a large shipper decides to close its operations. The future role of some of those carriers is somewhat uncertain because of these factors.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.8 - Be aware of the current issues facing the railroad industry today.

48. Describe some of the strengths of the rail industry.

ANSWER: The key strengths of the rail industry are the large carrying capacity and the ability to generate economies of scale. Each train car can carry two truck trailers. Trains have a much higher weight per car capacity also with virtually no weight restrictions. Additionally, trains generate significant economies of scale, so it costs very little to add an additional car to a train.

In general, trains are very effective at carrying large volumes of low-value commodities (such as coal) over long distances. The various types of cars available give rail companies flexible solutions for carrying various types of cargo. The rail companies assume liability for loss of damage.

The rail companies are improving equipment and technology with better yard management and routing software. The companies are also making improvements in the intermodal area, such as trailer on flatcar, and container on flatcar, to include double stacks.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.4 - Know the major types of commodities hauled by the railroads.

49. Describe the various types of rail company rolling stock.

ANSWER: The rail companies have a number of solutions available to meet the demand of customers to move various types of products. The rail companies have developed specialized rolling stock to support the various commodities being shipped. This rolling stock includes: Boxcar (plain): Standardized roofed freight car with sliding doors on the side used for general commodities Copyright Cengage Learning. Powered by Cognero.

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Chapter 06: Railroads Boxcar (equipped): Specially modified boxcar used for specialized merchandise, such as automobile parts Hopper car: A freight car with the floor sloping to one or more hinged doors used for discharging bulk materials Covered hopper: A hopper car with a roof designed to transport bulk commodities that need protection from the elements Flatcar: A freight car with no top or sides used primarily for TOFC service machinery and building materials Refrigerator car: A freight car to which refrigeration equipment has been added for controlled temperature Gondola: A freight car with no top, a flat bottom, and fixed sides used primarily for hauling bulk commodities Tank car: Specialized car used for the transport of liquids and gases With these various types of rolling stock, the companies can transport virtually any type of cargo.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.5 - Recognize the different types of equipment used in the railroad industry.

50. Discuss some of the elements of railroad industry‘s cost structure.

ANSWER: The rail industry cost structure is based on fixed costs (such as rights-of-way) and variable costs (such as labor).

The fixed costs: The right-of-way is the track and land that the track is on. The purchasing of land, and then the construction of track is a significant capital expense for the rail company.

Once that right-of-way is established, it must be maintained. This too carries significant costs. The rail company also has significant investments in the various types of rolling stock and in the locomotives. The terminal facilities (train stations) and the associated freight yards represent significant investment and maintenance costs.

The variable costs: The two main variable costs for the rail industry are labor and fuel. Much of the railroad labor force is highly skilled and expensive. While rail is more fuel efficient than trucks, fuel still accounts for a significant portion of the variable cost.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 6.6 - Discuss the nature of costs in the railroad industry and how they impact pricing decisions.

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Chapter 07: Airlines 1. Which event marked the beginning of the modern airline industry? a. The Wrights‘ first flight at Kitty Hawk in 1903 b. The U.S. Post Office‘s examination in 1908 of the feasibility of air mail service c. The Lindbergh‘s flight to Paris in 1927 d. The use of airplanes for mail transport ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.1 - Appreciate the importance of air transportation in the U.S. economy.

2. What category of air carriers have an annual revenue of less than $100 million? a. Major b. National c. Local hub d. Regional ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: For-Hire Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

3. Air carrier revenues are concentrated in which group of carriers? a. All-cargo, exempt, commuters and private b. Commuters, charters, all-cargo c. Major, nationals, regionals d. Private, regulated, exempt ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: For-Hire Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

4. Most airline revenues arise from: a. freight shipments. b. baggage shipments.

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Chapter 07: Airlines c. passenger travel. d. aircraft leasing and support services to private aviation.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview and Significance QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.1 - Appreciate the importance of air transportation in the U.S. economy.

5. The Transportwriter.com corporation owns four corporate aircraft of various sizes which they use to transport executives to various company locations, and documents and small freight between the company headquarters and its production facilities. What type of carrier is Transportwriter? a. Private b. Commuter c. Exempt d. Charter ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

6. What is the percentage of revenue generated by the top 10 air carriers? a. 75 b. 86 c. 91 d. 96 ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

7. Deregulation of the airlines in 1978 led to expectations that the number of carriers would increase. What has been the actual result of deregulation regarding the number of carriers in the market? a. The number of carriers did increase initially but has remained steady of late. b. The number of carriers did initially increase and the numbers continue to grow. c. The number of carriers initially decreased but increased by 1994.

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Chapter 07: Airlines d. The number of carriers initially decreased and have continued to decrease.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

8. The competition air carriers face from surface modes for either freight or passengers can be characterized as which of the following? a. Very strong b. Limited c. Very little d. Almost none ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Competition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

9. Air carriers that have too many flights and seat miles on a route are known to have which amount of capacity? a. None b. Limited c. Some d. Excess ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Competition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

10. Which is the best reason for the increase in airline intramodal competition since deregulation in 1978? a. Substitution of smaller aircraft for larger aircraft b. U.S. carriers forming alliances with foreign airlines such as United with Air Canada c. Increased use of discount fares in lieu of full fares d. New air carriers entering given markets ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines POINTS: 1 DIFFICULTY: Easy REFERENCES: Competition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

11. What is the primary method of service competition between air carriers? a. Frequency and timing b. In flight cabin service and added amenities c. Serving new cities to force more competition d. Advertising ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Competition QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

12. Which of the following commodities would be most likely to be shipped on an air carrier? a. Commodities in high volume b. Low-value finished goods c. Raw materials and partially finished goods d. High-value and time-sensitive goods ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

13. The traffic manager for WLG, Inc. is evaluating transportation modes for shipment of the company‘s products.

WLG‘s components division produces electronic assemblies according to buyer‘s specifications. The typical product is high-value (in the range of $30,000 to $50,000), small (less than 8 inches square), and very fragile. Insurance costs are $1,750 per day for each item, and the shipment distance is 2,500 miles. Which mode of transportation would be most appropriate? a. Amtrak b. Air c. Freight forwarder d. Time-guaranteed delivery truck ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

14. Air freight transportation is attractive to shippers because of which of the following? a. The speed and reliability of the service b. Higher liability assumed by the air carriers and prompt payment of claims c. Quick acknowledgment of liability by the air carriers and prompt payment of claims d. Strict safety regulation by the FAA and higher liability limits required by the STB ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

15. Which is the best reason for the relatively low proportion of fixed costs in the cost structure of the air carriers? a. Private investment in the airways and airports b. The small number of aircraft that are actually owned by the airlines versus those that are leased for varying periods of time c. Public investment in the airway and airport d. The proportion of energy and labor costs in the cost structure ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

16. Which cost element of the U.S. scheduled airlines accounts for the largest portion of operating costs? a. Flying operations b. Maintenance c. Administration d. Fuel ANSWER: d POINTS: 1 DIFFICULTY: Medium Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

17. Which government agency specifies acceptable flight operations and the hours of service for pilot? a. FAA b. STB c. DOT d. FMCSA ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

18. Why do business people pay more for airline travel? a. The expense of the travel is paid for by their company and the business traveler demands more services than the leisure traveler. b. They usually arrive and depart during low-demand periods. c. They have to keep more rigid schedules. d. Their travel expense is tax deductible, and they can afford higher fares to offset the lower fares charged to leisure travelers.

ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Rates QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

19. What does the operating ratio measure? a. Number of seats sold divided by miles operated b. Operating expense divided by operating income c. Stock share price divided by the total number of shares outstanding d. Number of airplanes in the fleet divided by miles flown by type ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

20. Which factor is the main determinant in air cargo pricing? a. Discounts from full price levels, as is done with motor carriers b. Weight of the item being transported c. Empty space on the aircraft d. Direction of travel of the shipment ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

21. Shippers using air cargo transport may have to pay an over-dimensional charge. In which situation is the charge assessed by the carrier to gain a more appropriate revenue? a. When the cargo shipped does not weigh much but takes up a lot of space b. When the cargo is a gas rather than a solid c. When the cargo is a solid rather than a gas d. When the shipment takes up all the available cargo space in the aircraft and matches the allowable load weight for the aircraft ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.7 - Understand the concepts of economies of scale and density in the airline industry.

22. The airlines utilize technology to offer faster and more efficient service for their customers. One application of technology, developed by the airlines, is a paperless system called the Fast Flow Program. What is the Fast Flow Program designed to do? a. Speed aircraft takeoff and departure from congested airports b. Speed the processing of international passengers into the United States c. Speed the processing of air freight cargo through customs processing d. Speed the handling of passenger baggage ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.8 - Be aware of current issues facing airlines today.

23. How much did U.S. airlines spend on fuel as of May 2022? a. $5.51M b. $6.51M c. $5.51B d. $6.61B ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

24. How many people were employed in the air carrier industry as of May 2021? a. 100,000 b. 500,997 c. 759,542 d. 1,000,000 ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

25. Based upon the number of passengers, which was the top airline in 2020? a. American b. Delta c. Southwest d. JetBlue ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

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Chapter 07: Airlines 26. Which air carrier had the highest revenue from passenger miles in 2020? a. American b. United c. Southwest d. Alaska ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Market Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

27. Which aircraft has the highest cargo payload in terms of tons? a. B747-300 b. B747-F c. MD-11 d. L1011 ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

28. Which aircraft has the highest operating cost in terms of dollars per hour? a. B747-200 b. DC-8 c. B727-100 d. L1011 ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Operating and Service Characteristics QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

29. If aviation fuel is $2.60 a gallon and a plane uses 2,624 gallons per hour, what is the price of fuel consumed per hour? a. $2,000 b. $6,822 Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines c. $7,163 d. $8,869 ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

30. Which airport historically is the largest with regard to the annual number of passengers? a. Pitt-Greenville b. London Heathrow c. JFK/New York d. Atlanta ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Cost Structure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

31. What is a commuter airline?

ANSWER: It is a regional carrier.

POINTS: 1 DIFFICULTY: Hard REFERENCES: For-Hire Carriers QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

32. What is a no-frills carrier known for?

ANSWER: Low fares and limited snacks and drinks POINTS: 1 DIFFICULTY: Medium REFERENCES: Competition QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

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Chapter 07: Airlines

33. What is the primary advantage of air transportation?

ANSWER: The primary advantage is speed.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Introduction QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.1 - Appreciate the importance of air transportation in the U.S. economy.

34. What are three functions performed at air terminals?

ANSWER: Loading and unloading passengers, aircraft servicing, and cargo handling.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Equipment QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.5 - Be familiar with the different types of equipment used by airlines.

35. What is airline pricing characterized by?

ANSWER: Discounts from full fare.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

36. When are air carriers considered neither accessible nor dependable?

ANSWER: Except in adverse conditions such as fog or snow, air carriers are capable of providing reliable service.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

37. What was the passenger fatality rate for autos versus airlines in 2020?

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Chapter 07: Airlines ANSWER: Autos had 35,468 fatalities and airlines had 418.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.8 - Be aware of current issues facing airlines today.

38. Explain the early development of air transportation in the United States.

ANSWER: U.S. aviation began with the flight of the Wright brothers in 1903 at Kitty Hawk. In 1908, the federal government began studying the feasibility of air mail service. During that period, the government began to contract for mail capacity; this gave rise to commercial transportation companies. The modern airline industry was born with the transport, in the early 1920‘s and 1930‘s, of mail and passengers on airplanes. Speed is the greatest asset of air transportation and the prime reason for the growth and development of the industry.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.1 - Appreciate the importance of air transportation in the U.S. economy.

39. Distinguish between private air carriers and for-hire air carriers.

ANSWER: Private air carriers are owned by a company for transportation of its own personnel or freight in aircraft that the company owns or leases. Most private air is used to transport company personnel.

For-hire carriers provide air transport services to customers for a fee. For hire carriers can be separated into two categories according to type of service offered (all-cargo, air taxi, commuter, charter, and international) and annual revenue (majors, nationals, regionals).

POINTS: 1 DIFFICULTY: Medium REFERENCES: Types of Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

40. What are the revenue classifications of the U.S. based for-hire air carriers? Explain with examples.

ANSWER: Air carriers are categorized according to annual operating revenues. The classifications are Majors, Nationals, and Regionals.

Major air carriers have annual revenues of more than $1 billion and provide service between Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines major population centers in the U.S. Examples include American, United, Southwest, and Delta.

National air carriers have revenues of $100 million to $1 billion and provide service to less populated areas and major population centers. Examples include Midwest, Sun Country, and PSA. Regional air carriers have annual revenues of less than $100 million, provide service within a particular region of the country, and connect less populated areas with larger population centers. Examples include Air Midwest, Big Sky, and Piedmont.

The all-cargo carrier, as the name implies, transports cargo. In some cases, the commuter line is owned by one of the large carriers. Examples include UPS and FedEx. The commuter carriers serve second tier markets and connect with the major air carriers. An example is US Airways Express.

Charter carriers cater to both passenger and freight but normally do not operate on a specified schedule except as required by the firm chartering the airplane.

POINTS: 1 DIFFICULTY: Medium REFERENCES: For-Hire Carriers QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.2 - Gain knowledge of the types and number of carriers in the U.S. airline industry.

41. Describe the characteristics of the commodities transported by air carriers.

ANSWER: Examples of commodities that move via air carriers include mail, clothing, communication products and parts, photography equipment, mushrooms, fresh flowers, industrial machines, high- priced livestock, racehorses, expensive automobiles, and jewelry. Normally, basic raw materials such as coal, lumber, iron ore, or steel are not moved by air carriage. The high value of the products that are shipped by air provides a cost-savings trade-off, usually but not always from inventory, that offsets the higher cost of air service. The old adage ―Time is money,‖ is quite appropriate here.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Operating and Service Characteristics QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.4 - Become aware of the operating and service characteristics of airline transportation.

42. What is the major advantage of air freight? How does this relate to logistics principals discussed earlier?

ANSWER: The major advantage of air freight is speed and the value that speed provides an individual or a company.

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Chapter 07: Airlines For example, in comparison to a manufacturing shut down, the cost of air transportation is often inconsequential. An urgently needed part for an assembly line might have a $20 value, but if the air-freighted part arrives on time to prevent the assembly line from stopping, the ―opportunity‖ value of the part might become hundreds of thousands of dollars. Thus, the $20 part might have an emergency value of $200,000, and the air freight cost is a small portion of this emergency value.

Examples of commodities that move via air carriers include mail, clothing, communication products and parts, photography equipment, mushrooms, fresh flowers, industrial machines, high-priced livestock, racehorses, expensive automobiles, and jewelry. Normally basic raw materials such as coal, lumber, iron ore, or steel are not moved by air carriage. The high value of these products provides a cost-savings trade-off, usually but not always from inventory, that offsets the higher cost of air service. The old adage ―Time is money‖ is quite appropriate here.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction & Industry Overview and Significance QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.1 - Appreciate the importance of air transportation in the U.S. economy.

43. Define and discuss the length of haul and capacity of air carriers. How does this relate to intermodal competition?

ANSWER: Air carriers are long haul transporters. The average length of haul is currently about 886 miles, far greater than either bus or rail.

Recent developments have seen aircraft of greater capacity being added to some lanes; the larger airplanes can carry 375 persons or up to 100 tons of freight. Airlines are trying to do a better job of sizing aircraft to routes to trim cost.

Air freight shipments tend to be small, less than 500 pounds, so less packaging may be required for shipments moving via surface carriers.

Air carriers are reasonably reliable except when weather conditions interfere. However, accessibility may be a problem for some users, given the distance to a major airport.

However, the overall speed of air travel may offset that to some extent. In the short haul market, up to 500 miles, trucks compete effectively on an overnight door-to-door basis.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Competition QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

44. What is the situation as it relates to financing and operation of air terminals or airports? How does this relate to other carriers?

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Chapter 07: Airlines ANSWER:

The air carriers‘ terminals (airports) are financed by a government entity. The carriers pay for the use of the airport through landing fees, rent and lease payments for space, taxes on fuel, and aircraft registration taxes. In addition, users pay a tax on airline tickets and air freight charges. Terminal charges are becoming increasingly more commonplace for passenger traffic.

The growth and development of air transportation is dependent upon adequate airport facilities. Therefore, to ensure the viability of air transportation, the federal government has the responsibility of financially assisting the states in the construction of airport facilities.

The various state and local governments assume the responsibility for operating and maintaining the airports.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Equipment QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.5 - Be familiar with the different types of equipment used by airlines.

45. Explain the cost structure of the air carriers.

ANSWER: The cost structure consists of a high proportion of variable costs relative to fixed costs. The variable costs are about 80 percent of total operating costs, while 20 percent are fixed. The fixed costs are low because of the public investment in airports and airways. The major items of airline operating expenses are labor and fuel. Labor costs amount to 25 percent and fuel costs are about 34 percent of operating expenses. Maintenance and other costs consume the rest of the operating expenses.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

46. What is the situation of airline labor? Be sure to include required skill levels, wages, and the impact of unions.

ANSWER: Air transportation employs many people with high skill levels, such as aircrew and ground crew personnel, and management. Some positions, such as pilots and mechanics, require high skill levels and federal licensing. Other positions require less skill and are on par with employees in other modes.

The FAA controls the nature of flight operations and hours of service for pilots. Mechanics and pilots must pass examinations regarding safety and operations and be licensed. Federal licensing in the airline industry is similar to that required by railroad engineers and truck drivers. These employees‘ hours of service are also regulated by the government.

Pilot wages depend upon the plane rating of the pilot. Wages also differ between unionized and non-unionized airlines, where unionized employees will often earn more than nonunion.

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Chapter 07: Airlines POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

47. There are two ratios which are used to measure airline performance. One measures efficiency while the other measures equipment utilization. Define both and describe how they are computed and what factors they measure.

ANSWER: An important measure of operating efficiency used by air carriers is the operating ratio. The operating ratio measures the portion of operating income that goes to operating expenses: Operating Ratio = (Operating Expense/Operating Income) x 100 Only income and expenses generated from passenger and freight transportation are considered. Like the motor carrier industry, the air carrier industry‘s operating ratio was in the low to mid-90s, between 1994 and 2000, ranging from 96.9 in 1994 to 94.7 in 2000.

However, the operating ratio for the industry in 2013 was 93.0. The overall profit margin is small, and a loss is incurred when the operating ratio exceeds 100.

Another widely used measure of operating efficiency is the load factor (previously discussed). The load factor measures the percentage of a plane‘s capacity that is utilized.

Load Factor = (Number of Passengers/Total Number of Seats) x 100 Airlines have raised plane load factors to the 65-70-percent range. The particular route and type of plane (capacity) directly affect the load factor, as does price, service level, and competition.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

48. Discuss the current issues facing the airline industry.

ANSWER: Safety is a primary goal of aviation. While air is the safest mode of transportation (auto is the most unsafe) there is still a great deal of anxiety by the public with respect to aviation safety. Any incident involving airplanes receives a great deal of publicity from the media because of the large number of people affected at one time. While there were 33,522 auto accident fatalities in 2013, and 447 fatalities on scheduled airline in 2013, accidents involving motor vehicles affect only a few people in each incident and tend to garner much less media attention.

Several factors affect airline safety. First, airport security has come under close scrutiny over Copyright Cengage Learning. Powered by Cognero.

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Chapter 07: Airlines the past several years. As a result of September 11, 2001, airport security has reached an alltime high, causing more delays at airport terminals. The U.S. Government created the Office of Homeland Security to be the agency that monitors and manages the security of the U.S. borders.

As with other transportation modes, the issue of substance abuse concerning pilots and ground crews has become important. Strict drug-testing policies and alcohol consumption guidelines are in effect for pilots and other aircraft personnel. In spite of these concerns, airline travel is still a very safe form of transportation; however, these issues are currently being addressed by the airlines to ensure that airline transportation remains safe.

Technology is another major item as the airline industry must offer quick and efficient service to attract business; it constantly needs more sophisticated equipment. An example of such technology efficiency is the Air Cargo Fast Flow Program, which was designed by the Port Authority of New York/New Jersey. The Fast Flow Program is a paperless system that speeds the processing of air freight cargo through customs processing and provides better tracking of shipments and better communication between connecting carriers. These improvements will allow customers to receive their inbound shipments faster than ever before.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Current Issues QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.8 - Be aware of current issues facing airlines today.

49. Describe the nature of service competition in the airlines.

ANSWER: Primarily, service competition concerns frequency and timing of flights. The premium flight departures are early morning (7AM to 10AM) and late afternoon (4PM to 6PM). The demand difference for flights taking off 3 hours later between the same city pairs is significant.

The airlines also compete through attempts to differentiate their service through advertising of amenities (e.g., on time arrival, friendliness, live satellite television, and frequent flyer programs).

Some airlines are competing through no-frills service (e.g., Southwest). They charge lower fares but there is also a lower level of service with respect to items like snacks and drinks.

Additionally, no-frills typically have only one class of service.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Competition QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.3 - Understand the level of competition in the U.S. airline industry.

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Chapter 07: Airlines 50. Describe Economies of Scale in airline operations.

ANSWER: Airline economies of scale result from extensive use of large-sized planes. Market conditions (sufficient demand) must exist to permit the efficient utilization of larger planes (i.e., if the planes are flown near capacity, the seat-mile costs will obviously decrease).

Unlike other industries, the airline cannot ―inventory‖ an unused seat. If the plane takes off with the empty seats, the seats are ―lost‖ for that flight because the airline cannot inventory the excess capacity for another flight that might be overbooked.

The marginal cost of filling those 10 empty seats right before the doors on the aircraft are closed are negligible. Another factor indicating large-scale operations for air carriers is the integrated communication network required for activities such as operating controls and passenger reservations.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Cost Structure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.7 - Understand the concepts of economies of scale and density in the airline industry.

51. Describe the factors that affect price in the airline industry.

ANSWER: Ticket restrictions: Staying over a weekend or advanced purchase Business travel: Business people generally pay more due to rigid schedules and they depart and return during high demand times.

Impact of competition from other airlines Time and day of departure and return Level of service (coach versus first class) POINTS: 1 DIFFICULTY: Medium REFERENCES: Rates QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 7.6 - Appreciate the impacts of fuel and labor costs on airlines cost structures.

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Chapter 08: Water Carriers and Pipelines 1. Water transportation is attractive to shippers for the movement of which commodities? a. Automobiles and construction machinery b. Large, bulky and oversized shipments c. Basic raw materials d. Inventory items ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Brief History of Water Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.1 - Understand the importance of domestic and global waterways to the development of the global economy as well as the economy of the United States.

2. Which is the first major classification of water carriers? a. Company-owned and exempt carriers b. For-hire and private carriers c. Exempt and private carriers d. Regulated and exempt carriers ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.3 - Discuss the various types of water carriers and their roles in the overall water carrier system.

3. Which of the following best describes the domestic water carrier industry? a. Limited number of small firms b. Large businesses with some offshore ownership c. The carriers that report to the Surface Transportation Board's water section d. The regulated carriers that account for approximately one-fourth of the industry's total carriers ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.3 - Discuss the various types of water carriers and their roles in the overall water carrier system.

4. Which category of carrier dominates the for-hire segment of the water carrier industry?

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Chapter 08: Water Carriers and Pipelines a. Common b. Contract c. Exempt d. Regulated ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.3 - Discuss the various types of water carriers and their roles in the overall water carrier system.

5. The water carriers‘ principal competitor for the movement of grain, coal, and ores is which mode of transportation? a. Pipelines b. Canadian and foreign-owned water carriers c. Railroads d. Motor carriers ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.4 - Understand the competitive environment for water carriers on an intramodal as well as an intermodal basis.

6. Water carriers compete to a limited degree with motor carriers. In most cases, what is the main interaction between the motor and water carriers? a. To move shipments from one area at a port to another b. To transport liquid cargo from a tanker to a refinery c. To transport shipments too small for a barge to an area when they can be assembled into a large enough quantity for a barge d. To overcome accessibility constraints of water carriers, linking inland areas to the waterways ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.5 - Discuss the service and operating characteristics of water carriers as well as their cost structure and equipment challenges.

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Chapter 08: Water Carriers and Pipelines 7. Transit time via water transportation is the longest of the four primary modes. This modal service disadvantage has to be traded off against the low cost to the shipper for the transport of commodities. This tradeoff usually makes water transport attractive for which commodities? a. Automobiles and construction machinery b. Large, bulky and oversized shipments c. Basic raw materials d. Inventory items ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.5 - Discuss the service and operating characteristics of water carriers as well as their cost structure and equipment challenges.

8. Water carriage is recognized as being a catalyst for economic activity in a community. For which of the following is this recognition used as a justification? a. Private investment in waterway construction b. Public investment in railroad construction as a connector for water transportation c. Public investment in and operation of ports d. Private investment in highway construction as a connector for water transportation ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.2 - Appreciate the role and significance of the water carrier industry to the global economy and to the United States, and how the water carrier industry complements the other basic modes of transportation.

9. Public aid is given the water carriers in the form of waterway construction, development and maintenance. How do the water carriers repay the government for the aid received? a. By agreeing to haul government traffic free of charge b. By paying a 25 percent surcharge on their income taxes c. By paying user charges in the form of lock fees and fuel taxes d. By making no repayment; all the aid offered is free of charge since both commercial carriers and private citizens use the waterways for business and pleasure ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.2 - Appreciate the role and significance of the water carrier industry to the global economy and to the United States, and how the water carrier industry complements the other basic modes of transportation.

10. Water carriers‘ intramodal competition is: a. fierce, intense, and ongoing. b. very laissez-faire or live and let live. c. very limited due the nature of industry. d. mandated by the ICC termination Act of 1995.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.4 - Understand the competitive environment for water carriers on an intramodal as well as an intermodal basis.

11. The Supreme Court decided that the pipelines are required to operate as common carriers if a shipper of oil demands their services. This decision is known as the: a. Standard Oil Case. b. Alaska North Slope Case. c. Champlin Oil Case. d. Hepburn Case.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

12. What is a significant factor allowing the pipelines to increase their capacity and move more tonnage? a. Larger pipe diameters b. Seamless pipe c. Major advances in technology d. Government regulations which require that the lines move product more quickly ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

13. Pipelines account for 20% of the total intercity tonnage shipped in the U.S. However, their revenues are only 4% of the total intercity transportation revenues. What is the reason for this? a. High incidence of loss and damage b. Low reliability c. Shipper's ability to negotiate lower rates because of intense competition among modes d. Low rates ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

14. Which of the following best describes the oil pipelines in the United States? a. Primarily operated as private carriers on a not-for-hire basis b. Primarily operated as private carriers on a for-hire basis c. Primarily operated as common carriers on a for-hire basis d. Primarily operated as common carriers on a not-for-hire basis ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Brief History of Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

15. Which two factors have contributed to joint ownership of large-diameter pipelines? a. High variable costs of ownership and low rates b. Economies of scale and high fixed costs of ownership c. Government regulation and development funds d. Rail competition and the growth of domestic water transport ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline History Overview Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.8 - Discuss the various types of pipeline companies and their importance in the global transportation system.

16. What commodity is an important part of the U.S. total pipeline network? a. Natural gas b. Oil and oil products c. Chemicals d. Coal ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Water Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.1 - Understand the importance of domestic and global waterways to the development of the global economy as well as the economy of the United States.

17. What is a major advantage offered by the pipelines? a. Capability b. Low rates c. Long transit times with ―storage in transit‖ d. Accessibility ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

18. The most serious threat to the pipeline industry is from which form of competition? a. Canadian companies building new pipelines into the U.S. b. Natural-gas-powered pipeline c. Intramodal d. Intermodal ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Pipelines QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

19. Oil pipelines used for movement of products from storage areas and refineries to market-oriented tank farms are classified as which type of lines? a. Gathering b. Transmission c. Trunk d. Product ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.8 - Discuss the various types of pipeline companies and their importance in the global transportation system.

20. The pipelines provide their own rights-of-way, construct the pipelines and pumping stations, pay property taxes, and provide for the preventative maintenance of their transportation networks. This contributes to the high proportion of which of the following costs in the pipeline's cost structure? a. Variable b. Fixed c. Mixed d. Revenue ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

21. Different grades of crude oil or products in the pipeline at the same time may not mix because of a technique which keeps them separated. This is done with a: a. Block b. Batching pig c. Batching ball d. Slurry ANSWER: b POINTS: 1 DIFFICULTY: Medium Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines REFERENCES: Pipeline Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

22. Which mode of transportation has costs that come closest to pipeline costs? a. Rail b. Motor c. Water d. Air ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Pipeline Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.10 - Discuss the cost structure and rates of pipelines and understand how it impacts their rates and services.

23. How many kilometers of waterways are there in the United States? a. 10,000 b. 15,000 c. 26,000 d. 31,000 ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.6 - Understand the challenges and issues faced by the water carrier industry in the 21st century.

24. Which of the following is not a commodity that water and rail compete to move? a. Grain b. Coal c. Oil d. Chemicals ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Brief History of Pipelines Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

25. As of 2020, how many short tons were transported by water in the U.S. in total? a. 1,483.1 million b. 2,226.4 million c. 2,226.4 billion d. 3743.3 billion ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 8.5 - Discuss the service and operating characteristics of water carriers as well as their cost structure and equipment challenges.

26. List the most frequently overlooked mode of transportation by the public.

ANSWER: Water carriers and pipelines are frequently overlooked by the public.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Water Transportation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.1 - Understand the importance of domestic and global waterways to the development of the global economy as well as the economy of the United States.

27. As of 2020 how many ports are there in the U.S. handling waterborne activities?

ANSWER: There are more than 300 ports.

POINTS: 1 DIFFICULTY: Moderate REFERENCES: Water Transportation Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.2 - Appreciate the role and significance of the water carrier industry to the global economy and to the United States, and how the water carrier industry complements the other basic modes of transportation.

28. What Supreme Court judgement resulted in the requirement for pipeline owners to act as common carriers if there was Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines service demand?

ANSWER: Champion Oil case POINTS: 1 DIFFICULTY: Easy REFERENCES: Brief History of Pipelines QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

29. Approximately how much has operating revenue for natural gas pipelines decreased between 2019 and 2020?

ANSWER: 3 percent POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

30. According to the U.S. Department of Transportation, what is the total investment in pipeline?

ANSWER: $21 Billion POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

31. Explain the nature of water transportation and trace the developmental importance of the mode.

ANSWER: Water transportation uses natural infrastructure as support. Unlike rail and road, water transportation enjoys a low infrastructure cost (except for canals). While rail needs track, and trucks need road, water is a naturally occurring medium. Rivers, inland channels, and oceans can be used to transport with very little modification. However, water does require ports or other types of loading and unloading facilities. These can be expensive and congested.

Water transportation has played an important role in the development of the U.S. The early settlers used water as a means to access markets in England and Europe. Additionally, water was used to transport goods using inland rivers. Many of our major cities developed around water ports on the coasts. Inland river and Great Lakes transportation provided access to inland settlements with coastal cities. If one looks at a map, it becomes clear that waterways Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines were a prime determinant of population centers and industrial and commercial concentration, particularly at port cities.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Water Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.1 - Understand the importance of domestic and global waterways to the development of the global economy as well as the economy of the United States.

32. Discuss and describe the competition situation of water carriers.

ANSWER: The primary source of water carrier competition is not between different water carrier companies but between water carriers and other modes of transportation. The relatively small number of water carriers results in a limited degree of competition. This is because the number of carriers on a given waterway is limited, so there is little incentive for the water carriers to compete with one another by lowering rates. Unlike the air carrier industry, water carriers do not bother to lower rates because they realize that the rate decrease will most likely be matched.

Water carrier competition is primarily with other modes that transport similar commodities; that is, high-volume, low-cost commodities. Unsurprisingly, the major water carrier competition is with rail and pipelines. Water carriers compete with railroads for the movement of dry bulk commodities such as grain, coal, and ores. Within the U.S. along inland channels, rivers, and waterways, rail and water transport similar commodities, such as grain, along the Mississippi and Missouri river systems. Rail also competes with water to move coal, ores, and grain in areas such as Pennsylvania, West Virginia, Kentucky, Ohio, and along the Great Lakes.

In similar areas, water carriers also compete with pipelines for the movement of bulk liquids (petroleum and petroleum products, and chemicals). Such liquids account for about one-third of the total tonnage transported by domestic water carriers. Bulk liquids are important commodities to both modes, and vigorous competition exists for moving bulk liquids along the Gulf, Atlantic, and Pacific coasts, as well as the Mississippi River system.

To a much more limited degree, water carriers compete with trucks. In general however, trucks, with their much greater accessibility, tend not to compete directly. Trucks tie into inland areas not served by water, so they have difficulty competing on a long haul with barge movements where a single barge has the payload capacity of 58 tractor trailers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transportation Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.2 - Appreciate the role and significance of the water carrier industry to the global economy and to the United States, and how the water carrier industry complements the other basic modes of transportation.

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33. Why are water terminals provided by the public and operated by local government agencies?

ANSWER: Similar to highways water carriers, terminals are funded and supported by government agencies. The difference is that water ports tend to be supported by local agencies, while highways are supported by the federal government. Again, like the highways, ports are considered a catalyst to economic activity in the community, and it is this belief that has spurred public investment in the operation of ports.

In addition to public support, some volume users of transportation invest in and operate port facilities or shipper-run terminals. The firms will typically work with the port authority and purchase or lease land and then build facilities and infrastructure to support their operations.

Numerous facilities have to be created by individual firms to handle such commodities as grain, coal, and oil. Typically water carriers have the opportunity to use these private facilities owned by shippers.

In addition to load /unload facilities, most port authorities have storage facilities that they rent. The sheer volume of commodities that can be loaded on a ship necessitates some type of staging facility to support loading and unloading ships.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Water Transportation Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.3 - Discuss the various types of water carriers and their roles in the overall water carrier system.

34. Discuss the cost structure of the water carrier mode and be sure to include fixed versus variable costs.

ANSWER: About 15 percent is of the water carrier's cost is fixed, while nearly 85 percent is variable.

Fixed costs include depreciation and amortization; variable costs are fuel, labor, and user charges. This cost structure is similar to that of motor carriers – low fixed cost, high variable costs.

Like trucks, and unlike rail, water carriers have relatively low fixed costs because they do not have to own or provide for their waterways. Waterways are provided by nature, and typically the government maintains, improves, and controls them. This is similar to trucks and the highway, and the opposite of rail and the rail track system, which is owned and maintained by the rail company.

The water carriers do pay user charges – lock fees, dock fees, and fuel taxes – for the use of government-provided facilities. These user charges are variable, and directly related to the volume of business.

POINTS: DIFFICULTY: REFERENCES:

The other variable costs include line-operating costs (cost of operating ships, barges, and facilities), operating rents (cost of renting facilities and equipment), and maintenance.

1 Hard Water Transportation Industry Overview

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Chapter 08: Water Carriers and Pipelines QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.5 - Discuss the service and operating characteristics of water carriers as well as their cost structure and equipment challenges.

35. Discuss at least two of the unique aspects of the pipeline industry.

ANSWER: Based on the type of commodity transported, most pipelines operate as common carriers even though they are primarily owned by the oil companies, and the relatively small numbers of pipeline companies compared to the volume of product transport. Additionally, pipeline is the only commodity that does not have a back haul. Pipelines are configured to support the flow of product in a single direction.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Brief History of Pipelines QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

36. Explain the ownership patterns of the pipelines.

ANSWER: In general, the oil companies own the pipelines. The oil companies have seen ownership of pipelines as a way to control markets and exert dominance. Individual oil companies own the largest share of pipeline. This is followed by pipelines owned by joint ventures. The remainder, a small percentage of pipelines, is own by railroads, independent oil companies, and other industrial companies.

During WW II, the federal government briefly entered the pipeline business when it developed two pipelines to bring crude oil and oil products from the oil fields of the Southwest to the Northeast to ensure an uninterrupted flow of oil. After the war, these two pipelines, known as the Big Inch and the Little Inch, were sold to private companies.

In some cases, pipelines are joint ventures among two or more companies. This makes sense due to the high capital investment necessary for large-diameter pipelines.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.8 - Discuss the various types of pipeline companies and their importance in the global transportation system.

37. What are the four major commodities transported by pipelines?

ANSWER: Pipelines primarily move four major commodities.

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These commodities are crude oil and oil products, natural gas, coal, and chemicals.

Crude oil and oil make up the bulk of commodities moved through a pipeline. In 2001, crude oil and oil products accounted for about 60 percent of total pipeline use. Between 1990 and 2006, pipelines saw a 5.6% increase in oil-related freight ton-miles.

Natural gas pipelines account for the second largest number of intercity pipeline ton-miles.

Natural gas pipeline companies produce about 10 percent of the gas they transport.

Independent gas companies produce the remaining 90 percent and transport it via the pipelines.

Coal pipelines account for the third largest volume. Because coal is not in a liquid form, it does not usually come to minds as a ―pipelinable‖ commodity. Coal is converted into slurry in order to move it through pipelines. Slurry is created by pulverizing the coal and then mixing it with water in a one-to-one ratio by weight. Once the coal has reached its destination, the water is removed and the coal is ready for use. Coal pipelines use enormous quantities of water, which causes concern in several western states where their installation has been proposed, because there is a scarcity of water. Such water is not reusable (no backhaul).

Chemicals are the last of the four primary commodities shipped by pipeline. The three major chemicals are anhydrous ammonia, which is used in fertilizer; propylene, which is used for manufacturing detergents; and ethylene, which is used for making antifreeze.

These commodities meet the pipeline requirement for high volume and low cost, and these commodities are either liquid or convertible to liquid. Pipelines offer low cost and low loss /damage for these types of commodities.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

38. The pipeline mode of transportation has a small number of very large carriers. What are the reasons for this small number of carriers?

ANSWER: There are four primary reasons for this for the small number of pipeline carriers.

First, barriers to entry. The start-up or capital costs for a pipeline are very high. Second, pipeline economies of scale are achieved through the diameter of the pipe. As the pipeline diameter increases, the capacity increases at an even greater rates. For instance, a 50% increase in diameter results in more than a 50% increase in capacity. However, the cost increase for larger diameter pipes is much less than the relative increase in capacity. Bigger pipes mean less investment per mile when compared with capacity. Also, larger pipes mean lower operating cost per barrel. Because of these diameter-related economies of scale, duplication of capacity and competing lines are uneconomical.

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Chapter 08: Water Carriers and Pipelines Third, procedural requirements to become a carrier, along with the associated legal costs for entry, limit the number of pipeline companies.

Fourth, most pipeline capacity is dedicated to oil and natural gas. The pipelines are built to support movement of those commodities from the oil and gas fields to refineries or users. As such, the pipelines are typically built for the companies that own those fields. There is little opportunity or reason another pipeline would be used.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

39. Describe the relative service advantages and disadvantages of pipeline transportation.

ANSWER: Advantages: The major advantage of pipeline transportation is low rates and low loss and damage of the commodity being transported. Due to the nature of the commodities being moved, the pipeline companies must have adequate warehouse space to stage products prior to pipeline induction. In general, pipeline companies provide this storage for free and pipeline carriers assume full liability for loss of damage. Additionally, pipeline reliability is high, there is seldom a service failure, and pipelines are unaffected by weather. This dependability permits accurate forecasting of scheduled deliveries and diminishing needs for safety stock.

Disadvantages: The primary disadvantage of pipeline is that the commodity must be in liquid form and the mode is relatively slow. The slow speed can lead to higher levels of inventory waiting for movement. In addition, pipelines have limited accessibility. The only way to extend this accessibility is to transfer to rail car, tanker truck, barge, or ocean tanker. Lastly, pipeline operations are single direction and do not support small quantity shipments.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.10 - Discuss the cost structure and rates of pipelines and understand how it impacts their rates and services.

40. Define, describe, and discuss the nature of intramodal and intermodal competition for pipelines.

ANSWER: Competition between pipeline companies (intramodal competition) is limited. This limitation is caused by the small number of companies (slightly more than 100). The industry acts as an oligopoly (few competitors with high barriers to entry). This oligopolistic structure leads to limited price competition. The second reason for lack of intramodal competition is the economies of scale and high fixed costs associated with pipelines. In the case where more than one company might utilize a pipeline in a certain lane, such companies have partnered Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines for joint ownership of large-diameter pipelines. This is because the construction of smaller parallel lines is not very efficient. Further, the high capital costs preclude duplication of facilities to a large extent.

From an intermodal competition perspective (competition between modes), the greatest threat to pipeline industry comes from water. There is also potential competition from railroads and motor carriers. Yet even with these forms of transportation, the level of competition is limited. Water tanker operations are able to compete because their rates are similar to pipelines‘. However, the limited coverage of water carrier service also limits its effective competitiveness. Trucks have increased the number of products they carry that can also be carried by pipelines. However, truck service complements rather than competes with the pipeline because trucks often perform a distribution function for pipelines (i.e., delivery).

Due to the economies of scale and the low variables costs, once a pipeline has been constructed between two points, it is difficult for other modes to compete.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

41. Describe the role of gathering lines and trunk lines in pipeline operations.

ANSWER: Gathering lines are smaller pipelines that go from an active well to a major trunk line. The trunk lines go to an oil or gas field but do not go to individual wells. Gathering lines are relatively small in diameter. They usually do not exceed 8 inches in diameter. In contrast, trunk lines are usually 30-50 inches in diameter. Gathering lines are frequently laid on the surface of the ground to ensure ease of relocation when a well or field runs dry. Trunk lines, on the other hand, are usually seen as permanent and are laid underground.

The term trunk line is often used in conjunction with oil movements and can refer to crude oil trunk lines or oil product lines. Oil trunk lines move oil to tank farms or refineries in distant locations, whereas oil product lines move the gasoline, jet fuel, and home heating oil from refineries to market areas. Technically, any long-distance movement via a large-diameter, permanent pipeline implies a trunk-line movement. Therefore, when coal, natural gas, or chemicals move via pipelines, that movement is classified as trunk-line movement.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

42. Since pipelines transport liquids, how do they keep the various liquids from mixing together? What happens if they do Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines mix?

ANSWER:

The pipeline companies are able to separate different type of commodities going through a pipeline. If the commodities going through the line are different grades of crude oil, or if there are different types of commodities going through the line at the same time, the batches are separated by a rubber ball, called a batching pig.

Additionally, the companies plan the movement of commodities through the pipeline such that if there is any mixing, it is both limited and a mix between a lower-grade product and a small amount of higher-grade product, so the mixing has no negative effect. Usually products are scheduled one month in advance with kerosene moving first, then high-grade gasoline, then medium-grade gasoline, then various other products, with home heating oil last. In addition, before operations commence where different commodities are sent through the pipeline, the pipeline is typically cleaned. When commodities that are not very similar are sent through the pipeline, the pipeline is cleaned to prevent any contamination.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Brief History of Pipelines QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.7 - Appreciate the development and current position of the pipeline industry globally as well as in the U.S. economy.

43. Compare pipeline pricing to pricing by other modes and describe how the pipelines price their services.

ANSWER: The major difference between pipeline and other modes of transportation is that pipelines do not use freight a classification system such as those used by rail and truck. Pipelines are able to carry a very limited number of goods. That limitation makes specialization of commodities rates unnecessary. Pipeline rates are low. Pipelines carry 20% of the ton-mile capacity but account for 4% of ton-mile revenue.

The nature of pipeline operations (one-way movement, limited geographic coverage of points, limited products, etc.) provides little opportunity to provide differential pricing practices. Pipelines quote rates on a per-barrel basis (one barrel equals 42 gallons). Quotes for rates are typically point-to-point or zone-to-zone. Also, minimum shipment sizes, usually called tenders, are required; these range from 500 barrels to 10,000 barrels.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Pipeline Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.10 - Discuss the cost structure and rates of pipelines and understand how it impacts their rates and services.

44. The projections for water traffic for 2050 show it increasing. However, from 2019-2020, there was a decrease. Why did this occurr?

ANSWER: The increase in domestic water transportation is evidence that many manufacturers and Copyright Cengage Learning. Powered by Cognero.

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Chapter 08: Water Carriers and Pipelines suppliers would experience serious problems in maintaining their competitive position without the availability of low-cost water transportation. The increase in water transportation shipments is attributable in part to the growth of U.S. exports.

An interesting dimension of the freight traffic carried by water carriers is the impact of global commerce. The biggest decline was in the volume of domestic traffic between 1995 and 2020, which was the result of less basic manufacturing and more effective intermodal competition.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.6 - Understand the challenges and issues faced by the water carrier industry in the 21st century.

45. Discuss water transportation labor.

ANSWER: Water transportation has a similar labor rate as rail, and has a much higher labor rate than pipeline. Water carriers use one employee for every 2.72 million ton-miles. This is almost as efficient as rail, which is at 4.47 million ton-miles per employee. Pipeline, the most efficient, has 39.2 million ton-miles per employee. In comparison, motor carriers have .4 million tonmiles per employee.

For water operations, labor is required for loading and unloading. Labor is also required to transfer to connecting modes or store freight waiting on movement. In general, the low labor rates come from the fact that bulk materials can be loaded using automatic devices.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Water Transport Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.5 - Discuss the service and operating characteristics of water carriers as well as their cost structure and equipment challenges.

46. Define, describe, and discuss the nature of intramodal and intermodal competition for waterways.

ANSWER: An interesting dimension of the freight traffic carried by water carriers is the impact of global commerce. The biggest decline was in the volume of domestic traffic between 1995 and 2020, which was the result of less basic manufacturing and more effective intermodal competition. However, it is interesting to note that the volume of foreign commerce on the waterways increased, which mitigated the overall decline in total waterborne commerce.

The port also facilitates the transfer of freight from one mode to another. The port is usually served by railroads and motor carriers. Terminals at the port will have railroad sidings to handle inbound and outbound rail freight, as well as parking lots for motor carrier equipment.

Ports play a key role in promoting the efficiency of intermodal transportation.

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Chapter 08: Water Carriers and Pipelines

Because barges and ships carry larger loads than rail or motor carrier vehicles, storage facilities are necessary at the port. The storage areas receive cargo from many trucks and railcars. This freight is held until sufficient volume is obtained to be handled effectively by barge or ship. Conversely, when a loaded vessel arrives at port, the freight is unloaded, stored, and then dispatched in hundreds of railcars or trucks at some later date.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Water Transport Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 8.9 - Understand the nature of the operating and service characteristics of pipe- line carriers and what makes them unique in the transportation system.

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Chapter 09: Third Party Logistics 1. Companies may smartly outsource all of the following except: a. information technology. b. core activities. c. manufacturing. d. logistics.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.1 - Understand the concept of third-party logistics and its role in the movement of goods.

2. What is one of the strengths of an Asset Based 3PL? a. Ability to provide direct and immediate solutions b. Flexibility with respect to fixed assets c. Not limited to internal infrastructure d. Likely to create innovative solutions ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

3. Which of the following is not a concern with a non-asset based 3PL? a. Significant internal capacity b. Complexity of the relationship c. Lack of flexibility d. Ability to create internal economy of scale ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

4. By which foundational service offerings are 3PLs typically categorized? a. Transportation, Distribution, and Marketing b. Forwarder, Distribution, and Human Resources Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics c. Transportation, Distribution, and Forwarder d. Human Resources, Marketing, and Distribution ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

5. What type of 3PL traces their origin to freight movement via truck, rail, or other? a. Forwarder based b. Financial based c. Distribution based d. Transportation based ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

6. What type of 3PL originated from the public or contract warehousing business? a. Forwarder based b. Financial based c. Distribution based d. Transportation based ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

7. What group of 3PLs does not own equipment, but instead arranges transportation services? a. Forwarder based b. Financial based c. Distribution based d. Transportation based ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

8. What types of 3PLs provide services such as freight payment, freight bill auditing, and freight claims management? a. Forwarder based b. Financial based c. Distribution based d. Transportation based ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

9. What type of service involves local transportation of containerized cargo? a. Merge in transit b. Surface freight forwarding c. Intermodal marketing d. Drayage ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

10. What type of special service unites shipments from multiple suppliers and eliminates the need for traditional warehousing? a. Dedicated contract carriage b. Household goods movement c. Merge in transit d. Drayage ANSWER: c POINTS: 1 DIFFICULTY: Medium Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

11. What group of service providers is organized to move e-commerce delivery of goods to consumers‘ homes? a. Pool distributor b. Last mile delivery c. Household goods movement d. Dedicated contract carriage ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

12. In 2020, the U.S. 3PL industry produced how much revenue? a. $190.3 billion b. $487 billion c. $774 billion d. $998 billion ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

13. In 2020, what were the total 3PL costs? a. $2,025.5 billion b. $4,343.8 billion c. $7,000 billion d. $9,092.1 billion ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

14. According to the text, 3PL spending is highest in: a. North America. b. Europe. c. Asia-Pacific. d. Latin America.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

15. Which of the following companies use 3PLs? a. FedEx b. Amazon c. Blue Dart d. Walmart ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

16. What is a reason for using 3PL services? a. Outsourcing is not a corporate philosophy. b. Logistics is a core competency of the company. c. The company needs greater process flexibility. d. The company requires shipment security.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

17. According to the Penn State-Capgemini study what percentage of 3PL users state that their 3PL relationships are successful?

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Chapter 09: Third Party Logistics a. 77% b. 80% c. 90% d. 95% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: 3PL User Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

18. This step in establishing and sustaining a 3PL relationship involves determining your area of core competency and knowing how a 3PL may help you create a competitive advantage. a. Strategic assessment b. Decision to form relationship c. Evaluation of alternatives d. Structuring of an operating model ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Establishing and Managing 3PL Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.5 - Understand the size and scope of the third-party logistics market.

19. Which of the following capabilities are considered the top customer need of 3PL users? a. Continuous improvement b. Information technology c. E-commerce fulfillment d. Lifecycle returns management ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Establishing and Managing 3PL Relationships QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.5 - Understand the size and scope of the third-party logistics market.

20. In which strategic requirement do 3PLs support home , manufacturer direct, and alternate site delivery? a. International expertise b. Sustainability knowledge Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics c. Omni-channel agility d. Talent availability ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.6 - Evaluate the reasons for outsourcing and the results achieved.

21. When the market for transportation services becomes very competitive, what becomes scarce to companies? a. 3PL usage b. Technology c. Transportation capacity d. Metric tons ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.6 - Evaluate the reasons for outsourcing and the results achieved.

22. To avoid carriers and 3PLs, what do some companies retain for their shipping needs? a. A private fleet b. Unlabeled carriers c. A government asset d. 4PL ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 3PL Versus Private Carrier QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.8 - Appreciate the current challenges and competitive issues in the third-party logistics industry.

23. Over the road carriers are usually paid on the basis of the __________. a. weight of their equipment b. days on the road c. government rate tables d. miles driven Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

24. Shipments for over-the-road carriers that average 45,000 pounds require __________. a. 2-axle equipment b. 5-axle tractor-trailer combination c. single-axle combination d. only a tractor trailer ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

25. What are two basic types of lease agreements for private trucking? a. Full service and finance b. Low interest and high interest c. Cost and direct d. Working and renting ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: 3PL Versus Private Carrier QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 9.4 - Discuss the reasons why companies seek integrated third-party logistics services.

26. According to the textbook, what is the definition of a 3PL? ANSWER: An external supplier that performs all or part of a company‘s logistics functions POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics LEARNING OBJECTIVES: LO 9.1 - Understand the concept of third-party logistics and its role in the movement of goods.

27. Describe an asset-based 3PL. ANSWER: A 3PL with tangible equipment and facilities POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

28. Which two additional capabilities are pursued by the leading 3PLs? ANSWER: First, they are developing integrated service offerings to accommodate customer desires for ―one-stop shopping‖ with a single service provider. Second, they are expanding service territories to meet the requirements of increasingly global customers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.1 - Understand the concept of third-party logistics and its role in the movement of goods.

29. What is the primary role of an Air Freight Forwarder?

ANSWER: Air freight forwarders consolidate small shipments for long-haul movement and distribution.

They primarily use the services of major passenger and freight airlines for long-haul service.

The air freight forwarder serves the shipping public with pickup service, a single bill of lading and freight bill, one-firm tracking, and delivery service.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

30. A financial base 3PL does what?

ANSWER: A financial-based 3PL provider helps customers with monetary issues and financial flows in the supply chain. Their traditional roles include freight rating, freight payment, freight bill auditing, and accounting services.

POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

31. Describe the categories of 3PL providers.

ANSWER: Transportation Based: These 3PLs trace their origins to freight movement via truck, rail, air, or other modes of transportation. As customer requirements expanded, these transportation companies developed 3PL subsidiaries or major divisions to provide a broader set of capabilities to serve the marketplace. Not only do these organizations move freight, but they may also manage transportation operations on behalf of customers, provide dedicated contract carriage, operate fulfillment centers, and develop logistics solutions, among other services. Some of the services provided by these 3PLs leverage the transportation assets of their parent companies, while others rely upon the assets of other companies. In all instances, these firms extend beyond transportation activity to provide a more comprehensive set of logistics offerings.

Distribution Based: These 3PLs suppliers originated from the public or contract warehousing business and have expanded into a broader range of logistics services. Based on their traditional orientation, these types of organizations are heavily involved in logistics activities such as inventory management, warehousing, and order fulfillment. Some have added transportation services to assist customers with the coordination, optimization and execution of shipments via all modes. The combination of distribution and transportation capabilities creates a one-stop integrated logistics service offering so that customers have the option of working with a single 3PL. These providers have significant experience in managing the logistics operations of the parent firm and, as a result, prove to be very capable providers of such services to external customers. While the idea that a 3PL firm may emerge from a corporate logistics organization is an interesting one, not all of these conversions have resulted in commercially successful 3PLs. Forwarder Based: This group of 3PLs includes freight forwarders, brokers, and agents that primary facilitate the flow of goods on behalf of customers. Though these companies do not own equipment, they arrange transportation services for LTL shipments, air cargo, and ocean freight, as well as providing other transportation-related services. Many are engaged in the support of international freight movement, booking cargo space with carriers, arranging freight movement to/from carrier facilities, preparing and processing documentation, and performing related activities.

Financial Based: This category of 3PL providers helps customers with monetary issues and financial flows in the supply chain. Their traditional roles include freight rating, freight payment, freight bill auditing, and accounting services. Some of the financial-based 3PLs have added information systems tools to provide freight visibility (e.g., tracking and tracing capabilities) and assist customers with electronic payment, carrier compliance reporting, and freight claims management.

Information Based: The Internet has provided an excellent platform for the growth of information-based 3PLs. These companies have digitized many activities that were previously performed manually or required the use of licensed software. Today, these Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics information-based 3PLs provide online freight brokerage services, as well as cargo planning, routing, and scheduling. They also offer companies access to transportation management systems, warehouse management systems, and performance management tools via the Internet on a per-use basis. This software as a service capability allows customers to avoid the high cost of licensed software implementation, instead paying for access on a variable cost basis. Though many information-based 3PLs have come and gone during the Internet era, a few strong players have emerged.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.3 - Describe the four types of transportation activities that are outsourced.

32. Describe the strengths and weaknesses of an asset-based 3PL. ANSWER: When a 3PL owns many or all of the assets necessary to run its customers‘ transportation and logistics activities, they are known as asset-based providers. This category includes companies that own truck fleets, containers, aircraft, terminals and warehouses, material handling equipment, technology systems, and/or other resources. An asset-based provider typically has its own labor force to perform the customers‘ work and management team to oversee the day-to-day operations. Having these internal resources allows the 3PL to leverage internal strengths and infrastructures to provide direct, immediate solutions.

Many customers choose to work with asset-based providers because they have readily available capacity, permanent employees, and direct control of the customers‘ freight. They prefer to work with a single 3PL who will take total responsibility for the outsourced activity and assume accountability if problems occur. Customers can also maintain greater visibility of outsourced activities and inventory if they are handled by a technology-savvy asset-based provider who performs all activities internally rather than handing them off to other companies.

The primary concern with asset-based providers is bias toward their internal resources. The argument is that these companies have made significant investments in physical assets and are tethered to those assets when developing solutions for customers. This internal focus may not always generate the most flexible solutions or produce the most cost-efficient transportation and logistics services for the customers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

33. Describe the strengths and weaknesses of a non-asset based 3PL. ANSWER: When a 3PL contracts with other firms to provide transportation and logistics services rather Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics than owning the required equipment and facilities, it is called a non-asset based provider.

This type of provider acts as a service integrator and is not restricted to using any particular warehouse or transportation company in providing services to its customers. Non-asset based providers offer expertise in negotiating contracts with transportation companies and distribution centers in an effort to achieve the best combination of price and service for their customers.

Non-asset based providers may also focus on international freight flows via freight forwarding, customs brokerage, and related activities. Finally, such providers may also offer strategic planning and technology services. Consulting firms like Accenture, Cap Gemini, CSC Consulting, and some software firms fall into this category.

Customers view non-asset based providers as being more flexible than their asset-based counterparts. Non-asset based 3PLs can be unbiased in their decision making, as they are not limited to an internal infrastructure of assets. Because they are not restricted to using any particular transportation company or set of facilities to serve customers, they are free to be objective in choosing the best set of service providers and create innovative solutions for customers. This can lead to tailored services and lower overall costs for the customer.

There are also concerns with non-asset based providers. First, these companies do not have significant internal capacity to handle customers‘ requirements. This can be a problem during times of economic expansion, when transportation equipment availability is squeezed. Also, there are more moving parts and relationships to manage when a non-asset based provider uses external service providers on behalf of their customers. It is imperative to have strong IT capabilities to maintain control and visibility of customers‘ freight that is dispersed among a variety of transportation and warehousing companies.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

34. Please list and explain four of the ten intermediary and special services (as listed in the textbook) which are offered by 3PLs to their customers.

ANSWER: Surface freight forwarding: Surface freight forwarders pick up, assemble, and consolidate shipments and then hire carriers to transport and deliver the consolidated shipments to the final destination. They match demand with capacity and help customers obtain economic rates for the consolidated shipments. From the perspective of the customer, freight forwarders act as the carrier, so they are liable to shippers for loss and damage to freight that occurs during transit.

Air freight forwarding: Air freight forwarders consolidate small shipments for long-haul movement and distribution. They primarily use the services of major passenger and freight airlines for long-haul service. The air freight forwarder serves the shipping public with pickup service, a single bill of lading and freight bill, one-firm tracing, and delivery service.

Freight brokerage: Brokers function as ―middlemen‖ between the shipper and the carrier Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics much the same as a real estate broker does in the sale of property. A broker is an independent contractor paid to arrange transportation. The broker normally represents the carrier and seeks freight on their behalf to avoid moving empty equipment. They may also represent shippers seeking capacity on the spot market.

Intermodal marketing companies: IMCs are intermediaries between shippers and railroads and are also known as consolidators or agents. They are facilitators or arrangers of rail transportation service. They assume little or no liability; the legal shipping arrangement is between the shipper and railroad, not with the agent. Freight charge payment usually is made to the IMC who, in turn, pays the long-haul carrier.

Shippers associations: These non-profit transportation membership cooperatives arrange for the domestic or international shipment of members‘ cargo with motor carriers, railroads, ocean carriers, air carriers, and others. The association aggregates cargo and ships the collective membership cargo at favorable volume rates.

Dedicated contract carriage: 3PLs offering this hybrid private/for-hire arrangement serve as a customer‘s private fleet with a customized turnkey solution. Dedicated contract carriage includes the management of drivers, vehicles, maintenance services, route design, delivery and administrative support for a fixed price. Companies gain the advantages of a private fleet without the direct responsibility of capitalizing and operating it.

Drayage: These companies provide local transportation of containerized cargo. Drayage companies specialize in short haul movement of intermodal containers from origin to ocean ports and rail yards and from these facilities to their ultimate destination. They are typically contracted by the rail or ocean carrier to provide these pickup and delivery services.

Pool distribution: As an alternative to direct LTL service, a 3PL may move a large quantity of product in bulk to a specific market or regional terminal. From there, the pooled freight is off loaded, sorted by customer, and then reloaded onto local delivery trucks for distribution to final destinations. Pool distribution can reduce transit times, maintain shipment integrity, reduce claim potential due to less handling, and generate cost discounts versus LTL rates.

Merge-in-transit: A merge-in-transit system unites shipments from multiple suppliers at a specified merge point located close to the end customer. It eliminates the need for traditional warehousing, in which orders are assembled from inventory in stock for shipment. Merge-intransit provides a number of customer benefits, including the delivery of a single, consolidated shipment, reduced order cycle time, and lower transportation costs with less inventory in the system.

Last mile delivery: This group of service providers represents the final opportunity to impress customers with dock-to-door and store-to-door delivery. They often provide valueadded services such as inside delivery, assembly, installation, product testing, and packaging removal.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Industry Overview QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics LEARNING OBJECTIVES: LO 9.2 - Identify the different types of third-party logistics service providers.

35. Outline the steps involved in establishing and sustaining a 3PL relationship.

ANSWER: Step 1: Perform Strategic Assessment This first stage involves the process by which the manufacturer becomes fully aware of its transportation and logistics needs and the overall strategies that will guide its operations. This audit provides a perspective on the firm‘s transportation and logistics activities, as well as developing a wide range of useful information that will be helpful as the opportunity to form relationships is contemplated.

Step 2: Decision to Form Relationship When contemplating a 3PL relationship, the first issue focuses on which of the service provider‘s capabilities are needed by the company. A suggested approach to making this decision is to make a careful assessment of the areas in which the company appears to have core competency. For a firm to have core competency in any given area, it is necessary to have expertise, strategic fit, and ability to invest. The absence of any of these may suggest that the use of 3PL services is appropriate.

Step 3: Evaluate Alternatives Although the details are not included here, Lambert and his colleagues suggest a method for measuring and weighting the drivers and facilitators we have discussed. Then, they discuss a methodology by which the apparent levels of drivers and facilitators may suggest the most appropriate type of relationship to consider. If neither the drivers nor the facilitators seem to be present, then the recommendation would be for the relationship to be more transactional, or ―arm‘s length‖ in nature. Alternatively, when all parties to the relationship share common drivers, and when the facilitating factors seem to be present, then a more structured, formal relationship may be justified.

Step 4: Select Partners While this stage is of critical concern to the customer, the selection of a transportation or logistics partner should be made only following very close consideration of the credentials of the top candidate 3PLs. Also, it is highly advisable to interact with and get to know the final candidates on a professionally intimate basis.

Step 5: Structure Operating Model The structure of the 3PL relationship refers to the activities, processes, and priorities that will be used to build and sustain the relationship. As suggested by Lambert and his colleagues, components ―make the relationship operational and help managers create the benefits of partnering.‖

POINTS:

Step 6: Implementation and Continuous Improvement Once the decision to form a 3PL relationship has been made and the structural elements of the relationship identified, it is important to recognize that the most challenging step in the relationship process has just begun. Depending on the complexity of the new relationship, the overall implementation process may be relatively short or it may be extended over a longer period of time. If the situation involves significant change to and restructuring of the company‘s transportation or logistics network, for example, full implementation may take longer to accomplish. In a situation where the degree of change is more modest, the time needed for successful implementation may be abbreviated.

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Chapter 09: Third Party Logistics DIFFICULTY: Medium REFERENCES: Establishing and Managing 3PL Relationships QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.7 - Summarize the process for outsourcing transportation and logistics activities 36. When a firm is deciding to form a strategic partnership, the book recommends performing an audit of needs and overall strategies with regard to logistics operations. What is the goal of the audit, and what types of information should come from it?

ANSWER: This audit provides a perspective on the firm‘s transportation and logistics activities, as well as developing a wide range of useful information that will be helpful as the opportunity to form relationships is contemplated. Some types of information that may come from the audit include:      

Overall role of transportation and logistics in support of business goals and objectives Needs assessment to include requirements of customers, suppliers, and key logistics providers Identification and analysis of strategic environmental factors and industry trends Profile of current logistics network and the firm‘s positioning in respective supply chains Benchmark, or target, values for logistics costs and key performance measurements Identification of ―gaps‖ between current and desired measures of logistics performance (qualitative and quantitative)

Given the significance of most transportation and logistics relationship decisions, and the potential complexity of the overall process, any time taken at the outset to gain an understanding of one‘s needs is well spent.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.9 - Recognize the importance of information technology in managing outsourced activities.

37. Explain the concept of partnership drivers and identify four partnership drivers.

ANSWER: The partnership model incorporates the identification of ―drivers‖ and ―facilitators‖ of a relationship; it indicates that for a relationship to have a high likelihood of success, the right drivers and facilitators should be present.

Drivers are defined as ―compelling reasons to partner.‖ For a relationship to be successful, the theory of the model is that all parties ―must believe that they will receive significant benefits in one or more areas and that these benefits would not be possible without a partnership.‖ Drivers are strategic factors that may result in a competitive advantage and may help to determine the appropriate type of business relationship. Although there certainly are other factors that may be considered, the primary drivers include the following: Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics    

Asset/Cost efficiency Customer service Marketing advantage Profit stability/Growth

POINTS: 1 DIFFICULTY: Medium REFERENCES: Establishing and Managing 3PL Relationships QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.7 - Summarize the process for outsourcing transportation and logistics activities 38. List five of the eight elements of a well-structured 3PL operating model.

ANSWER: Planning Joint operating controls Communication Risk/reward sharing Trust and commitment Contract style Scope of the relationship Financial investment POINTS: 1 DIFFICULTY: Medium REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.9 - Recognize the importance of information technology in managing outsourced activities.

39. Describe the potential strategic needs of 3PL users.

ANSWER: Strategic Innovation: To provide maximum value to the customer base, 3PLs must be innovative and collaborative in solutions development. Information sharing on changing requirements is essential for the two parties to understand the dynamics of the situation at hand. Then, the 3PL must have the willingness and capability to develop novel solutions.

They also need to be more proactive in suggesting strategic solutions.

Technological Strength: Customers view technology as a critical capability of 3PL service providers to improve order management and cross-chain communication, enhance shipment visibility and event management, and manage day-to-day transportation operations. This need for strong, integrated technology capabilities from their service providers is essential for proactive control of freight as it moves across global supply chains.

Capacity Access: When domestic and global economies are strong, the market for transportation services becomes very competitive. A solution to the capacity dilemma is to Copyright Cengage Learning. Powered by Cognero.

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Chapter 09: Third Party Logistics work with 3PL service providers such as freight forwarders and brokers that have ongoing relationships with multiple carriers. The combined volume of the 3PL‘s customer base can be leveraged for consistent access to much needed capacity at competitive rates.

Talent Availability: At a time when SCM is gaining stature as a strategic driver of success, many organizations face a critical supply-chain talent void due to years of headcount reduction, training budget cuts, and the retirement of highly skilled individuals. One way to address the talent crisis is to hire a 3PL with strong and stable talent. Top 3PLs have the strategic foresight to invest in training, development, and retention programs that help them maintain a strong pipeline of leaders who can diagnose customer needs, develop effective solutions, and manage the implementation process.

Omni-channel Agility: No longer are 3PLs merely managing deliveries to the back door of retail outlets. Today, they are supporting home delivery, manufacturer direct delivery, alternate site delivery, and variations of buy online and pickup in stores. Collectively, this makes for huge omni-channel transportation and logistics challenges that many companies are not equipped to handle with their existing processes, talent, and IT resources. Customers must work with 3PLs that can effectively handle a growing inventory base and e-commerce orders that vary in type, size, and delivery location. These 3PLs must offer flexible solutions for rapidly moving inventory through these networks to customers and managing returns from customers.

Sustainability Expertise: The execution of supply chain processes has a significant impact on the environment – delivery processes require heavy use of refined oil products, generate carbon emissions, and contribute to congestion. Transportation managers are under increased pressure to deploy delivery methods that have lower environmental impacts – without raising the cost or reducing the quality of service. 3PL users need to work with service providers that are committed to sustainable supply chain practices and have developed expertise over time. While many 3PLs have adopted TMS tools to help them minimize resource use through the optimization of routes and the reduction of empty miles, a much smaller group has invested in alternative fuel equipment and LEED-certified facilities.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.9 - Recognize the importance of information technology in managing outsourced activities.

40. Describe the future issues and challenges facing the 3PL industry.

ANSWER: 3PL industry revenues have increased from $30.8 billion in 1996 to $154 billion (estimated) in 2014. This is due to the 3PL service providers‘ collective ability to provide high quality, competitively priced services in increasingly complex supply chains. As customers shift their global activities, expand their omni-channel activities, and pursue new innovations, the level of supply chain complexity will also grow. In turn, their service requirements will evolve.

3PLs, especially those developing far-reaching physical networks, integrated logistics capabilities, and effective IT tools will be well positioned to serve the emerging transportation and logistics needs of their customers.

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Chapter 09: Third Party Logistics To maintain pace with customers‘ future requirements, 3PLs will need to expand their capabilities through internal growth, mergers, and strategic acquisition of competitors. As customers shift production from far away locations to nearby emerging markets where the cost of labor, shipping, and land is less expensive, 3PLs will need to establish a presence in these new regions. 3PLs will also need to enhance their breadth of capabilities and strategic services to serve customer desires for one-stop shopping and lead logistics provider skills.

Finally, 3PLs will need to be a driving force of transportation and logistics innovation to ensure that they can meet the cost efficiency and service quality requirements of customers.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Strategic Needs of 3PL Users QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 9.9 - Recognize the importance of information technology in managing outsourced activities.

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Chapter 10: Transportation Risk Management 1. According to Freightwaves, what is the estimated range of cargo theft each year across the United States? a. $2 million to $3 billion b. $640 million to $10 billion c. $15 billion to $30 billion d. $24 billion to $42 billion ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

2. Which of the following is not one of the four steps in the risk management process? a. Identify the risk b. Analyze the risk c. Manage the risk d. Cost the risk mitigation ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.4 - Describe the general process for managing transportation risk.

3. Which of the following is a type of product loss? a. Pilferage b. Damage c. Climate control failure d. Labor disruption ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

4. What is deliberate product contamination called? a. Tampering b. Climate control failure Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management c. Exposure to contaminants d. Hedging ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

5. What type of risk can a truck breakdown be characterized as? a. Equipment accident b. Improper equipment loading c. Delivery delay d. Supply chain disruption ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

6. What three parameters are involved in risk assessment? a. Cost, probability, and impact b. Probability, impact, and proximity c. Cost, probability, and proximity d. Probability, cost, and proximity ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.4 - Describe the general process for managing transportation risk.

7. A risk mitigation strategy should produce an action plan that includes all of the following except: a. Roles and responsibilities for developing the strategy b. Resources required to carry out the planned actions c. Conditions present in order for risk level to be acceptable d. A way to get rid of the risk completely ANSWER: d Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

8. What is the simplest way to eliminate risk? a. Risk reduction b. Risk mitigation c. Risk avoidance d. Risk identification ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

9. Not putting all your ―eggs in one basket‖ is what type of strategy? a. Postponement b. Buffering c. Hedging d. Transfer ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

10. What is the final step in risk management? a. Reviewing and monitoring b. Reduction c. Identification d. Analysis ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

11. The International Maritime Transportation Bureau Piracy Reporting Centre reported how many incidents of piracy and armed robbery against ships in 2021? a. 132 b. 350 c. 773 d. 1000 ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

12. Along with supply chain security, what else is not optional in transportation? a. container security initiative b. visibility c. processes d. resiliency ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

13. What is a disturbance or problem that interrupts an event, activity, or process called? a. A transportation disruption b. A disruption c. A transportation risk d. A supply chain risk management ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Risk Concepts QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

14. In regard to risk management, it is important to test which of the following to ensure it will work as intended when a true disruption occurs? a. Action plan b. Insurance policy c. Product packaging d. Buffering strategy ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.7 - Appreciate the importance of an ongoing risk monitoring process.

15. What is the risk reduction strategy that seeks to limit risk by delaying a commitment of resources? a. Hedging b. Buffering c. Postponement d. Risk transfer ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

16. Which of the following is not a transportation risk reduction strategy? a. Use of generic packaging b. Use of event management software c. Use of motor carrier finances d. Use of the lowest-cost service provider ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

17. The process which provides a baseline evaluation of risk in a rapid and cost-effective manner is known as: Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management a. quantitative risk analysis. b. event management software. c. qualitative risk analysis. d. risk avoidance.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

18. Which of the following is not a common point of exposure for a potential security breach? a. Lax security processes b. Unprotected transfer facilities c. Data encryption d. Shipment control breakdown ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risks QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

19. Which risk-reduction strategy provides additional resources to reduce risks related to capacity shortages or performance problems? a. Postponement b. Buffering c. Hedging d. Transfer ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

20. Supply chain disruptions can result in: a. increased stock price. b. lower operating performance.

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Chapter 10: Transportation Risk Management c. decreased stock price. d. higher return on assets.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Risk Concepts QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

21. Risk transfer strategy provides a means to: a. secure containers in a port b. insure drivers against criminal activity. c. place liability on a third party. d. thwart pirate attacks.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Risk Concepts QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

22. Insurance is a common form of: a. incoterms. b. risk transfer. c. port management. d. maritime trade.

ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Risk Concepts QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

23. Risk mitigation can be referred to as: a. the acceptable amount of risk an entity is willing to carry. b. how much risk there is in rehiring OTC drivers. c. how much risk there is in hiring OTC drivers. d. the achievable amount of risk an entity is willing to carry.

ANSWER: a Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

24. Risk management planning is: a. static. b. a one-time process. c. not static. d. not cyclical.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

25. Risk review and monitoring is a: a. one-time process. b. continuous process. c. measure of efficiency. d. link to disruptive activity.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 10.7 - Appreciate the importance of an ongoing risk monitoring process.

26. Define risk management.

ANSWER: The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks POINTS: 1 DIFFICULTY: Easy REFERENCES: Risk Concepts QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management LEARNING OBJECTIVES: LO 10.2 - Explain the concept of risk management.

27. Describe business continuity planning.

ANSWER: The task of identifying, developing, acquiring, documenting, and testing procedures and resources that will ensure continuity of a firm‘s key operations in the event of an accident, disaster, emergency, and/or threat?

POINTS: 1 DIFFICULTY: Easy REFERENCES: Risk Concepts QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

28. What is the objective of risk assessment?

ANSWER: To evaluate the risks identified during Step 1 (Risk Identification) in order to determine how serious each risk is to the organization.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Risk Concepts QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

29. What is the purpose of transportation insurance?

ANSWER: Insurance is a common method of risk transfer. Rather than setting aside a large pool of money to self-insure against these possible problems, most transportation companies purchase coverage from insurance companies. They are using the strategy of risk transfer as the means to place financial liability on the insurance company should the risk occur.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

30. Discuss the importance of risk review and monitoring.

ANSWER: It is imperative to realize that risk management and mitigation plans are not perfect. Testing, experience, and actual disruptions will necessitate action plan changes and improvements to deal with the risks being faced. The goal of the risk review stage is to establish a repeatable, measurable, verifiable validation process that can be run periodically to verify the organization‘s ability to manage risk.

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Chapter 10: Transportation Risk Management POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.7 - Appreciate the importance of an ongoing risk monitoring process.

31. Define disruption and risk in general terms and in terms of transportation.

ANSWER: Disruption—disturbance or problems that interrupt an event, activity, or process Transportation Disruption—any significant delay, interruption, or stoppage in the flow of trade caused by a natural disaster, heightened threat level, an act of terrorism, or any transportation security incident Risk—exposure to the chance of injury or loss Transportation Risk—a future freight movement event with a probability of occurrence and the potential for impacting supply chain performance POINTS: 1 DIFFICULTY: Easy REFERENCES: Risk Concepts QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.2 - Explain the concept of risk management.

32. Outline the objectives of the risk management process.

ANSWER:  Develop a common understanding of risk across multiple functions and business units to manage risk cost-effectively on an enterprise-wide basis  Build and improve capabilities to respond effectively to low-probability, critical, catastrophic risks  Achieve a better understanding of risk for competitive advantage  Build safeguards against earnings-related surprises  Achieve cost savings through better management of internal resources  Allocate capital more efficiently POINTS: 1 DIFFICULTY: Medium REFERENCES: Risk Concepts QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.2 - Explain the concept of risk management.

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Chapter 10: Transportation Risk Management 33. Describe the four-step risk management process.

ANSWER: Step 1 involves identification of the potential threats and disruptions to which the organization is susceptible.

Step 2 focuses on evaluation and prioritization of the risks. The more vulnerable the organization‘s transportation process is to a potential risk, the more attention it should receive.

Step 3 requires the organization to develop proactive risk management and mitigation strategies. Structural and procedural changes may be required to execute the strategy.

Step 4 prioritizes continuity, vigilance, and process improvement. Ongoing testing of strategies, evaluation of their success, and scanning for new risks are needed to achieve maximum protection.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.6 - Discuss the four techniques for managing transportation risks.

34. Describe the six common risk categories related to freight transportation.

ANSWER: Product Loss: BSI Group estimates that global cargo theft resulted in losses of $22.4 billion worldwide in 2013 with 32 percent of the losses in Europe. However, the economic loss to a firm goes far beyond the value of the goods. Indirect costs of cargo theft include lost sales, expedite expenses for the delivery of replacement goods, disrupted customer service, and damaged brand value. Other indirect costs include claims processing and the potential impact on insurance rates and coverage.

Security experts estimate these indirect costs to be three to five times greater than the direct cost of the loss.

Product Damage: Though it would appear to be a relatively mundane risk, product damage is a potential peril that arises every time a shipment is handled. Employee inattention, negligence, and poor training all contribute to this very costly problem. Damaged product loses much, if not all, of its value. Repaired products can‘t be sold as new at full price.

Otherwise, damaged product may need to be salvaged to recoup some value, or discarded, incurring a total loss. The cost of freight claims processing and product replacement add to the financial impact of damage incidents.

Product Contamination: A particular risk to food, pharmaceutical goods, and other consumables is the possibility that product becomes contaminated en route from origin to destination. Customers may reject a delivery of goods if there is evidence of possible contamination. They do not want to assume the risk of product loss or the responsibility for disposal. Product contamination risk increases along with trip distance and time in transit.

The longer the goods are out of your control, the more opportunity exists for natural or manmade contamination issues to arise.

Delivery Delay: There are few things more frustrating than not receiving a scheduled delivery of a time sensitive shipment like concert tickets. If they arrive a day late, the tickets Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management are rendered worthless and you missed a great event. Companies who rely upon just-in-time delivery of inventory to keep their production lines running experience the same frustration, only to a much higher level of financial pain. If a critical shipment is delayed a few hours, production lines will stop and the lost productivity cost may be hundreds of thousands of dollars. These companies are at huge risk if delivery commitments are not kept. There are numerous delivery delay risks. Some transportation perils result from other supply chain strategies, such as sourcing goods from low-cost manufacturers in the Far East. This strategy significantly increases supply chain complexity and distance, boosting the possibility of late deliveries. Other risks are out of the company‘s control, though it is important to recognize their potential impact.

Supply Chain Interruption: Many transportation risks are created by poor execution of dayto-day operations. Ineffective decision making, employee errors, and basic glitches cause temporary disruptions of freight flows. Such risks pale in comparison to the devastating effects of supply chain interruptions that bring transportation operations to a grinding halt.

The cost of such disruptions is high and recovery time is prolonged. Although they don‘t occur frequently, these problems often fall outside the control of the company.

Security Breach: The increase of terrorist attacks, organized crime activity, and illegal immigration mandates tremendous effort to secure international borders. Transportation companies are now heavily involved in the development of policies and procedures to control freight and limit supply chain exposure to problems more effectively. A failure to protect intransit freight leaves the transportation company, its customers, and the general public vulnerable to acts that threaten security. Repeated failures lead to government calls for timeconsuming freight inspections and costly countermeasures. There is no shortage of security challenges facing organizations, especially with shrewd criminals scheming to exploit system flaws and security vulnerabilities.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risk Management Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.4 - Describe the general process for managing transportation risk.

35. Describe three supply chain interruptions currently facing the transportation industry.

ANSWER: Industry Consolidation—in times of excess capacity and low rates, financially unstable transportation companies are unable to compete. Such is the case in the global container shipping industry, where carriers have merged or joined operations alliances to survive. The changing market structure can cause capacity and cost challenges for customers due to fewer scheduled routes.

Labor Disruptions—many transportation companies and facilities rely upon unionized labor for freight handling and movement. When work-related disputes occur or labor contracts expire, a labor strike risk arises. Some strikes can be predicted in advance, though others are sudden ―wild cat‖ strikes that occur with little warning and create havoc. The cost of these supply-chain interruptions can be severe.

Capacity Shortages—during peak seasonal demand, transportation capacity is stretched to the Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management point that carriers are often unable to provide enough equipment and operators to service all customers. Transportation companies are able to increase rates or apply peak season surcharges to freight. At the same time, there is a risk of service quality failures due to facility congestion, equipment shortages, and operator inexperience.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risk Management Process QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.4 - Describe the general process for managing transportation risk.

36. How can companies proactively deal with high-probability/high-impact transportation risks?

ANSWER: Develop and maintain relationships with quality carriers—effective service providers are reliable, reasonably priced, and protect freight.

Use protective product packaging— to minimize the risk of concealed product damage or contamination, protective materials like cardboard, bubble wrap, foam packing peanuts and forms, plastic bags, and other materials should be used inside shipping cartons.

Properly secure freight inside containers—assuming that the ride will be rough encourages companies to safeguard their in-transit inventory. Loads should be secured and protected as needed.

Require the use of reliable equipment—allowing carriers to use defective or poorly maintained equipment to move your freight produces transportation risk. Work only with carriers that perform preventative maintenance, regularly upgrade their fleets, and have a strong track record of equipment safety compliance.

Leverage technology to maintain shipment control—monitoring in-transit freight not only provides peace of mind, but it also helps managers avoid potential problems and respond rapidly to disruptions. Visibility tools provide a seamless flow of timely information across the supply chain. Exception management tools detect performance problems and alert the affected organization. Corrective action can be taken to resolve the situation before the supply chain is adversely impacted.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.1 - Understand the nature of transportation risk and disruptions.

37. Describe the common points of security exposures.

ANSWER: Lax Security Processes—supply chain security and resiliency are not optional; they must be built into global transportation operations and related information systems. Companies must think about their potential security vulnerabilities and develop appropriate defenses.

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Unprotected Transfer Facilities—some transportation companies fail to do the simple things like lock doors, fence in facilities, and require security badges to limit access to freight and transportation equipment. Ease of facility entry and access promotes product theft, deliberate contamination, or catastrophic disruptions (such as hiding a bomb in a freight container).

Shipment Control Failures—freight visibility and access control are the keys to protecting in-transit goods from harm. When freight is not properly controlled, security risks and disruption opportunities increase. For example, unsupervised or unlocked freight containers provide hiding spots for stowaways attempting to enter a country illegally. Stowaways may contaminate the container‘s contents and cause legal headaches for authorities.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Risks QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

38. How does a company evaluate the seriousness of a transportation risk?

ANSWER: To assess risk, an organization should evaluate three parameters:   

Probability—the likelihood of the risk occurring Impact—the consequences if the risk does occur Proximity—the anticipated timing of the risk

Impact can be assessed in terms of the transportation risk‘s effect on time, cost, and/or quality. Proximity focuses on the temporal aspect of disruptive events, such as hurricanes or blizzards. Understanding their seasonality considerations and preparing appropriate strategies will help organization proactively manage these events.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Risk Concepts QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.5 - Understand the key factors in risk assessment.

39. Discuss the different types of product loss.

ANSWER: Product Pilferage—the theft of individual items from a shipping package by freight handlers, equipment operators, and managers is problematic. It is a particular challenge with smart- phones, pharmaceutical products, designer clothes, and other high-value goods that can be easily concealed and later sold for cash.

Shipment Jettison—in the movement of freight via water, it may be necessary to cast all or part of a ship‘s cargo overboard to save the ship, crew, and other cargo from perils such as Copyright Cengage Learning. Powered by Cognero.

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Chapter 10: Transportation Risk Management catastrophic weather, running aground, or fire. The master of the ship has the absolute right to jettison cargo when he reasonably believes it to be necessary, and the owners of the ship incur no liability. If the ship is carrying goods of more than one shipper, the rule of general average provides for apportioning the loss among all the shippers because all have benefited by the master‘s action.

Piracy and Hijacking—the International Maritime Bureau Piracy Reporting Centre reported 132 incidents of piracy and armed robbery against ships in 2021. Not only do these crimes create financial losses for companies but they often put ship crews at risk of being kidnapped, injured, or killed.

Product Damage—damage is a potential peril that arises every time a shipment is handled.

Employee inattention, negligence, and poor training all contribute to this very costly problem. Damaged product may need to be repaired or salvaged to recoup some value, or discarded, incurring a total loss. The cost of freight claims processing and product replacement add to the financial impact of damage incidents.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Risks QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 10.3 - Identify the primary categories and types of transportation risk.

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Chapter 11: Global Transportation Management 1. What is a liner ship? a. An ocean-going ship that travels a fixed route on a published schedule b. A ship that travels inland waterways on a demand schedule c. An ocean-going cruise ship that handles passengers on specific routes d. A ship owned or leased on a long-term basis by the company moving the goods ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

2. A break bulk ship: a. handles only bulk cargo. b. requires that shipments be crated for handling. c. sails in lanes where liners do not operate. d. allows vehicles to roll on or roll off.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Mode Selection QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

3. A charter is: a. provided by ships that are hired for a specific voyage or amount of time. b. an older ship which is in poor condition. c. a foreign flag vessel seeking to become a U.S. flag vessel. d. a ship where the crew is hired from various countries where wage rates are very low.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

4. The Ocean Shipping Reform Act expanded the ability of shippers to negotiate private, confidential service contracts Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management with liner companies. a. True b. False ANSWER: True POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

5. Which is the primary advantage of international air transportation? a. Speed b. Careful handling c. Paperwork reduction d. Door-to-door service ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

6. Which organization governs the pricing of international air freight? a. USDOT b. FMC c. ICAO d. IATA ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Terms of Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.03 - Recognize the roles of Incoterms, insurance, and terms of payment in managing global transportation risks and costs.

7. An NVOCC is a company: a. which handles rail freight that will be loaded on a ship. b. which handles international shipment but does not own any ships.

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Chapter 11: Global Transportation Management c. which assembles and disperses small shipments and moves these shipments in containers. d. subject to unique government controls; it can handle licensed cargos.

ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

8. A land bridge is a type of transportation used to: a. move marine containers by rail in substitution for all water routings. b. move marine containers by rail in substitution for local water service. c. move marine containers by rail to an inland, non-port city. d. avoid crossing large inland bodies of water such as Lake Michigan.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

9. The type of transportation that involves the use of two or more modes of transport to move a shipment from origin to destination is called: a. intermodal. b. ocean. c. air. d. direct service.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

10. What type of freight is loaded into or onto storage equipment at the origin and delivered to the destination in or on that same piece of equipment with no additional handling? a. Transload Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management b. Containerized c. Intermodal d. Landbridge ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

11. Which terms of trade maximize the importer‘s responsibility? a. E Terms b. D Terms c. F Terms d. C Terms ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Terms of Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

12. Which terms of trade obligate the exporter to obtain and pay for the main carriage and cargo insurance? a. E Terms b. F Terms c. D Terms d. C Terms ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Terms of Trade QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

13. Which of the following provide alternative landing locations to congested dual-purpose airports and reduce operating costs? a. Cargo-focused airports b. Port authorities c. Government regulations Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management d. International freight forwarders ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

14. To comply with customs regulations, at minimum, what must be displayed on each carton? a. Seller and Customer information b. Prominent logo and hazardous materials should be marked c. Cargo information and customer information d. Customer and Seller information, cargo information, and hazardous materials should be marked ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

15. In 2020, what percentage of the global transportation market required intercontinental delivery? a. 60% b. 72% c. 80% d. 98% ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.01 - Discuss the relationship between international trade and global transportation.

16. Containerships are built specifically for the purpose of moving: a. 20 and 30 feet containers b. 20 and 40 feet containers c. 30 and 40 feet containers d. 30 and 53 feet containers ANSWER: b Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management POINTS: 1 DIFFICULTY: Easy REFERENCES: Mode Selection QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

17. Which air freighter is used to carry oversized loads? a. B-747 b. Airbus 380 c. AN-124 d. Combi plane ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Mode Selection QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

18. Which of the following is not an ancillary service provider? a. International Freight Forwarders b. Non Vessel-Owning Common Carriers c. Export packer d. Ocean carrier ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

19. In terms of thousands of tons per year, what it the busiest seaport for container traffic? a. Long Beach b. Singapore c. Shanghai d. Rotterdam ANSWER: c POINTS: 1 DIFFICULTY: Medium Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

20. In terms of metric tons handled, what is the biggest cargo airport? a. Hong Kong International b. Atlanta c. Ted Stevens Anchorage International d. Memphis International ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

21. International freight forwarders are often referred to as: a. Price makers b. Travel agents of international freight transportation c. Demand forecasters d. Trade-related servicers ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Intermodal Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

22. What are the three critical transportation processes in global supply chains? a. Containers, Distribution, Incoterms b. Containers, Incoterms, Distribution c. Transaction, Incoterms, Communication d. Transaction, Distribution, Communication ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Terms of Trade Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.02 - Identify the three critical transportation processes in global supply chains.

23. Requests for payment from the exporter to the importer for purchased goods are known as: a. invoices. b. IOC requirements. c. land bridges. d. TEUs. ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Communication Processes QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.08 - Appreciate the value of timely, accurate global freight documentation and visibility tools.

24. Which document assures authorities in the exporting country that the product will be used for legitimate purposes? a. Shipper‘s export declaration b. Export Document c. Certificate of End Use d. Invoice ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Communication Processes QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 11.08 - Appreciate the value of timely, accurate global freight documentation and visibility tools.

25. When cargo reaches its destination country, it must be cleared through: a. a bill of lading. b. a freight forwarder. c. TATA. d. Customs.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Communication Processes QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management LEARNING OBJECTIVES: LO 11.09 - Articulate the customs clearance process for import goods.

26. Define direct service.

ANSWER:

Direct service between adjacent countries provides point-to-point flows of goods, generating the advantages of speed and safety because freight is handled less and moves straight to the destination.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Intermodal Transportation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

27. Define indirect service.

ANSWER: Indirect service, such as cross-ocean intermodal transportation, requires interim stops and transfers between equipment.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Intermodal Transportation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.06 - Evaluate the critical factors in carrier selection and route design for international shipments.

28. What are the most pressing issues regarding mode selection for international transportation?

ANSWER: Accessibility Capacity Transit Time Reliability Safety POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

29. What is a containership?

ANSWER: Containerships are built for the specific purpose of moving standardized 20-foot and 40-foot oceangoing containers. The largest of these ―box ships‖ hold up to 24,000 20-foot equivalent Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management units (TEUs). The containers are stacked in specific slots created by vertical guides and are secured via metal bars and twistlocks.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

30. What is a Foreign Trade Zone?

ANSWER: Another option for postponing the release of goods is using a Foreign Trade Zone (FTZ).

FTZs are sites within the United States (in or near a U.S. Customs port of entry) where foreign and domestic goods are held without a time limit until they are ready to be released into international commerce. Merchandise may enter an FTZ without a formal CBP entry, the payment of Customs duties, or government excise taxes. If the final product is imported, duties are not paid until the goods are released into the U.S. market. Items that are processed in FTZs and then re-exported are charged no duties. While in the FTZ, goods may be assembled, repaired, tested, repackaged, cleaned, or combined with other products.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Communication Processes QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.09 - Articulate the customs clearance process for import goods.

31. What is intermodal transportation, and what are its benefits in international trade?

ANSWER: Intermodal transportation involves using two or more modes of transportation to move a shipment from origin to destination. It is often said that international transportation is intermodal because so many goods moving from one country to another involve multiple modes and carriers. Virtually everything moving across an ocean will involve truck or rail carriers for product pickup and delivery and an air or ocean carrier for the linehaul portion of the trip.

Shifting freight between modes may seem inefficient and time consuming, but the improved reach and combined service advantages of intermodal transportation offset these issues. The primary benefits of intermodalism include the following: 

Intermodal transportation facilitates global trade. The capacity and efficiency of ocean transportation allow large-volume shipments to be transported between continents at relatively low per unit costs. The rapid speed of air transportation allows perishable goods to flow quickly between countries. The final domestic leg of the delivery can take place via truck. The ocean-truck combination makes products competitive across global markets by keeping the landed cost in check. The air-truck combination facilitates expedited flows of high-value goods and rapid replenishment of fast-selling products like trendy clothing.

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Chapter 11: Global Transportation Management 



Greater accessibility is created by linking the individual modes. The road infrastructure allows trucks to reach locations that are inaccessible to other modes, especially air transportation, water transportation, and pipelines. For example, air transportation can only move freight between airport facilities. Trucks provide the flow between the origin and departure airport as well as the arrival airport and the customer destination. Railroads can also facilitate the use of domestic river transportation and international ocean transportation. Getting low-sulfur coal from a Wyoming mine to a utility company in Japan would be best accomplished through a combination of rail and water transportation.

Overall cost efficiency can be achieved without sacrificing service quality or accessibility. In other words, intermodal transportation allows supply chains to utilize the inherent capabilities of multiple modes to control costs and fulfill customer requirements. If a furniture manufacturer needed to move 20 loads of furniture from North Carolina to California for export, a combination of truck and rail transportation would improve upon truck-only service. The speed and accessibility of trucks would be used for the initial pickup and final delivery, while cross-country transportation would be handled by the cost-efficient railroads.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.01 - Discuss the relationship between international trade and global transportation.

32. There are several types of ancillary service providers. Name three that focus on international transportation and describe the type of service they provide.

ANSWER: The ancillary service providers are international freight forwarders, international air freight forwarders, non vessel-owning common carriers (NVOCC), export packers, ship brokers, and ship agents.

International Freight Forwarders – The primary role of an international freight forwarder is to help importers and exporters transport their goods. Many IFFs specialize in particular service areas, modes of transport, or markets. IFFs are often seen as the travel agents of international freight transportation. These service providers identify and book the best routes, modes of transport, and specific carriers based on customer requirements at competitive rates.

Air freight forwarders operate in the international market similarly to domestic air freight forwarders. These agents contract for cargo movement either in the belly of passenger aircraft or on all cargo aircraft.

Non Vessel-Owning Common Carriers – When an organization wishes to move small shipments in less than containterload (LCL) quantities, an effective service provider is a non vessel-owning common carrier (NVOCC). Unlike IFFs, who usually act as the organization‘s agent, NVOCCs are common carriers that provide service at a container level. NVOCCs book container berths on ships on a regular basis, allowing them to gain advantageous rates from the ocean carriers. They can resell the space to customers in smaller increments at favorable rates. The NVOCC combines the goods from multiple customers into a single load Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management to fill a container. NVOCCs play a role similar to domestic freight forwarders and assemble and disperse less-than-container shipments and move them as full-container shipments.

Export Packers – Given the challenges of properly packing, marking, and loading shipments, many companies seek the assistance of export packing companies. These service providers work to ensure that products arrive safely. Export packers also help save money by using economical packing materials, improving space utilization inside cartons and containers, and taking steps to prevent theft. Finally, export packers also ensure that all packing regulations and marking requirements are met across the channel. Shipbrokers act as middlemen between the tramp ship owner and the receiver. Ship agents represent the interests of a liner company by facilitating ship arrival, clearance, loading, unloading, and fee payment while at a specific port.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Intermodal Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

33. What is a land bridge, and how is it used to facilitate the movement of marine containers? How does a land bridge function?

ANSWER: Land bridges involve a combination of ocean-rail-ocean intermodal transport. For example, a container travels from Tokyo to Seattle via ocean vessel, from Seattle to New York via train, and onward to Rotterdam via ocean vessel. This is an example of the Asia-America-Europe land bridge. The other primary route is the Asia-Europe land bridge.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

34. What are ocean shipping rates based upon?

ANSWER: Ocean shipping rates are impacted by carrier cost structure, commodity, freight volume, origin and destination points, and ancillary services required. The type of service provided— liner or charter—has a major influence on rate structures.

The general cost structure of liner operations, as with most ship operations, is largely fixed and common in nature. Approximately 80 to 90 percent of the total cost is fixed, and 10 to 20 percent is variable. Liner companies tend to have high overhead costs for marketing, management, and business development.

Because cargo loading, unloading, and fuel are the only primary variable costs, the ship‘s Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management operation cost is roughly the same regardless of the commodity or volume hauled. The problem of determining a cost per pound entails a difficult fixed-cost allocation process, which can be arbitrary at best. Ship operators will often determine unit costs per cubic foot of ship space used to evaluate the better price for the range of commodities handled.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.05 - Understand the unique capabilities of ocean, air, and intermodal transportation in moving freight globally.

35. Explain the three different types of ocean transportation service providers.

ANSWER: Liner service is provided by ships that travel on regularly scheduled voyages, following fixed routes with predetermined ports of call, similar to a bus route. Typically, a liner ship will serve a particular trade area, such as the trans-Pacific lanes between Asia and North America, trans-Atlantic lanes between Europe and North America, or Asia–Europe lanes.

Some liner ships travel the globe on ―round the world‖ schedules, passing through the Panama Canal and the Suez Canal.

Charter service is similar to hiring an Uber vehicle for direct point-to-point service. The ship owner essentially leases the vessel to a charterer (the customer) who uses the ship to move its own cargo. Some charterers move cargo for other companies with the goal of making money on the difference between leasing costs and the prices charged to other customers. Ship owners offer voyage charters for specific origin to destination trips or time charters for a specific period of time. A demise charter is a special time charter involving a long period lease of a vessel.

Private service is like operating a personal vehicle or private truck fleet. Private ships are owned or leased on a long-term basis by the exporter or importer. For example, Chiquita Brands International used to operate a private fleet of refrigerated ships called the Great White Fleet to move bananas and other fruits from Central American plantations to world markets. The return trip carried specialized shipping cartons and other supplies to the plantations. Oil and lumber products are also moved via private service.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

36. Explain the difference between integrated and nonintegrated carriers.

ANSWER: Integrated carriers like FedEx and UPS have this capability because they own ground delivery equipment as well as aircraft. They can offer a consistent schedule of pickup, delivery windows, and standard expedited service through their hub-and-spoke networks.

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Chapter 11: Global Transportation Management Thanks to their well-controlled processes, they are key players in the global delivery of expedited movement of letters, packages, and small shipments.

In contrast, nonintegrated carriers like Cargolux and Polar Air Cargo provide transport service from airport to airport. They rely on air freight forwarders or the customer to provide delivery service to and from the airport. Some nonintegrated carriers provide on-demand (charter) service for customers whose requirements dictate rapid, direct movement of goods.

Given the high cost of on-demand service from these carriers, it is reserved for emergency shipments, unique products, and unusual route requirements.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Mode Selection QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.04 - Analyze the key issues in effective international transportation mode selection.

37. How are port authorities organized? What is the function of port authorities?

ANSWER: Intercontinental trade moves primarily through airports and seaports, while intracontinental trade moves directly from origin to destination through international gateways or indirectly through intermodal transfer terminals and inland ports. Seaports and airports are discussed in detail below.

Port facilities can be privately owned, though many major international seaports and airports are government owned. The facilities are managed by a port authority, a governmental or quasi-governmental public agency charged with creating and supporting economic development in the port area. At a landlord port, the port authority builds the wharves, which it then rents or leases to a terminal operator. When the port authority is an operating port, it owns the facilities, cranes, and cargo handling equipment, hires the labor, and manages most of the day-to-day operations.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

38. Discuss the major challenges of seaport operations in their quest to remain competitive.

ANSWER: Port authorities must stay updated about equipment innovations, operational congestion, and labor challenges. First, the size of containerships continues to increase because ocean carriers are motivated to achieve economies of scale. Waterways will need to be dredged, port authorities and terminal operators must invest in larger cranes, and sailing schedules will have to change to accommodate the longer unloading and processing times for these huge ships.

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Chapter 11: Global Transportation Management A related concern is congestions at major seaports. As freight volume and vessel sizes increase, substantially higher cargo volumes per ship can occur. It is estimated that a port call from an 18,000 TEU ship could require 7,000 on/off container moves. This volume, combined with equipment shortages or poor landside operations, creates a high risk of port congestion and ships getting off schedule. During the first half of 2014, containerships calling at the Port of Hamburg experienced delays averaging 70 hours.

A third pressing issue is the periodic labor disputes and slowdowns that can result from protracted labor contract negotiations. For example, the 2014 negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association had the potential to disrupt 29 U.S. West Coast ports, including all the major West Coast container ports—Los Angeles, Long Beach, Oakland, Portland, Seattle, and Tacoma. Any work stoppages or slowdowns have the potential to send ripples across global supply chains.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective ports in delivery execution.

39. What are the current issues in airport operations?

ANSWER: Airports face a variety of challenges. They must be flexible enough to deal with economic upturns and downturns, and collaborate with airlines going through merger processes to maintain timely flows of cargoes and passengers through hub airports.

Achieving greater efficiency and timeliness can be a real challenge, given the interconnected nature of international airways and the antiquated state of air traffic control systems. The U.S. Federal Aviation Administration is slowly rolling out its Next-Gen air traffic control system, which relies on satellite-based navigation and digital communications. It will eventually replace radar-based navigation and radio communications to accommodate high traffic levels, reduce fuel consumption, and improve safety.

Another ongoing issue is the push for greater security in international cargo transport by air.

Airports must work with airlines and freight forwarders to support the provision of the 9/11 Commission Act that requires all cargo transported on a passenger aircraft to be screened for explosives as of August 1, 2010. Security agencies and airports around the world must constantly work to improve passenger screening technologies, control access to at-risk areas, and update processes to stay ahead of evolving threats posed by skillful and adaptive enemies.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Intermodal Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.07 - Describe the need for proper packaging, ancillary service providers, and effective Copyright Cengage Learning. Powered by Cognero.

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Chapter 11: Global Transportation Management ports in delivery execution.

40. Describe the customs clearing process.

ANSWER: The customs clearing process involves entry filing, arrival, examination, classification, taxation, and release.

Entry Filing: There are two parts to Entry filing: (1) figuring out which documents are necessary to determine whether merchandise may be released from USCBP custody, and (2) filing the documents that contain information for duty assessment and statistical purposes. In addition to the paperwork, there must be a bond in the amount to cover all fees and charges.

In many cases, the customs broker responsible for making entry may permit the use of his bond to provide the importer with the required coverage.

Arrival: As the goods arrive at the seaport or airport, USCBP is notified of arrival and unloading. Since 9/11, these requirements have increased and become more automated.

Carriers participating in the Automated Manifest System can receive conditional release authorizations after leaving the foreign country and up to five days before U.S. arrival. If the application is approved, the shipment will be released expeditiously after it arrives. This process is useful for time sensitive products, perishable goods (e.g., fruits and vegetables), and tariff quota merchandise.

Examination: After the documents are delivered and the cargo arrives, the cargo may be examined by USCBP, or the examination may be waived. Reasons for examining the goods and documents include the value of the goods for customs purposes and their dutiable status, whether the goods are properly labeled with their country of origin or other required markings, whether the shipment contains prohibited articles or illegal contraband, and whether the goods match the invoice. If no legal or regulatory violations have occurred, the clearance process continues. If problems are found, the shipment can be held pending correction, exported, or destroyed.

Classification: The goods are also classified under the applicable items in the U.S. Harmonized Tariff Schedule (HTS). The HTS comprises a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes.

Taxation: A duty is a tax that an importer must pay to bring goods into the country. When goods are dutiable, ad valorem, specific, or compound rates may be assessed. An ad valorem rate, the type of rate most often applied, is a percentage of the value of the merchandise. For example, a five percent ad valorem duty on a $50,000 shipment is $2,500. Import duty values can be as low as zero for trading partner countries like Canada and Mexico or as high as 100% (or more) of the product‘s declared value.

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE: HAS VARIABLES:

Release: After the clearance requirements are completed, and USCBP has accepted the rate and amount of duty ascertained, the entry is considered to be liquidated. The goods can be released to the importer for onward domestic delivery of the goods.

1 Hard Communication Processes Essay False

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Chapter 11: Global Transportation Management STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 11.09 - Articulate the customs clearance process for import goods.

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Chapter 12: Governmental Roles in Transportation 1. Which legal system relies upon principles or rules of law that were developed from court decisions? a. Statutory b. Judicial memory c. Common law d. Common market ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

2. The Interstate Commerce Commission (ICC) is usually described as: a. an arm of the Congress. b. an expert body providing continuity to regulation that neither the courts nor legislature could do. c. the reason that the railroad industry was in such poor condition prior to 1980. d. an agency with somewhat limited powers.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

3. States can regulate: a. interstate commerce. b. interstate commerce if it terminates in that state. c. certain safety issues that do not create an undue burden on interstate commerce. d. intrastate commerce if it originates and terminates in that state.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

4. Which sentence best describes the current regulation of transportation? a. The federal government controls all aspects of transportation. b. The federal government has removed most economic control but continues to oversee aspects of transportation safety.

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Chapter 12: Governmental Roles in Transportation c. The government still economically regulates portions of the motor carrier industry. d. The airline industry is free of all regulation, but the railroads are still closely regulated.

ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

5. What is the federal government‘s policy toward transportation? a. It allows the market to control all aspects of transportation. b. It consists of a series of often conflicting programs driven by politics. c. It considers this an issue for the states. d. Is a composite of laws, rules, funding programs, and regulatory agencies.

ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.02 - Understand the role and importance of national transportation policy.

6. What is the best justification for a national transportation policy? a. Without one, each mode would optimize its own operations. b. The business community would otherwise impose its will on the carriers. c. We must avoid being dependent on the transportation systems of other countries and we must remain competitive. d. Transportation is vital to commerce and defense.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.02 - Understand the role and importance of national transportation policy.

7. Which mode is not covered under the National Transportation Policy? a. Water carriers b. Exempt carriers c. Air carriers d. Rail carriers Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.02 - Understand the role and importance of national transportation policy.

8. What is the formal method used by Congress to influence national transportation? a. Congressional committees b. Lobbying groups c. The creation of laws d. Standing committees ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

9. Industry associations serve two purposes in connection with policy development. They are to: a. lobby and raise funds for political parties. b. meet with regulators and connect with state agencies. c. develop policy and write position papers. d. develop proposed legislative and administrative ruling concepts and serve as a united front to proposals harmful to the group.

ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

10. Transportation project planning is: a. a public activity seeking increased trade and lower cost of living. b. best done by the private sector as it recognizes return on investment. c. accomplished with little regard to financial return. d. not concerned with congestion.

ANSWER: a POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation DIFFICULTY: Hard REFERENCES: Transportation Planning, Promotion and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

11. The potential benefit of a public planning project is: a. facilitation of trade movement. b. increasing the social cost of delay. c. providing services in competition to that private industry would invest in. d. creating long term entitlements.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Planning, Promotion and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

12. Which is a major controversy regarding the Federal Highway Trust Fund? a. Whether the remaining portions of the federal suburban highway system will ever be built b. Whether it is legitimate to collect federal excise taxes on road tires c. Whether taxes should still be collected since the interstate highway system is 96 percent complete, and it is doubtful if the remaining 4 percent will be constructed d. Whether states should obtain revenues through vehicle registration fees that are assessed on a vehicle weight basis ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.08 - Appreciate the role of user charges in funding transportation initiatives.

13. While the motor carrier industry does not receive any direct government promotion, they still benefit from: a. the oversight provided by the Federal Motor Carrier Safety Administration. b. the highway trust fund which helps with building and maintaining roads. c. research conducted by the National Highway Traffic Safety Administration. d. the fact that most highway projects are done with government funds.

ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Planning, Promotion, and Programs Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.08 - Appreciate the role of user charges in funding transportation initiatives.

14. Amtrak was created to: a. relieve the railroads of the burden of non-profitable passenger business. b. allow federal planners to create a balanced system without the profit motive of the private sector. c. be the first step towards nationalization of the modes of transportation. d. relieve the pressure of automobile traffic on the highways by providing an alternate mode of transport.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

15. Some railroads have benefited from: a. imposition of federal safety regulations, relieving the carrier of this task. b. subsidies to operate abandoned rail lines where the states and others continue to operate. c. the government-operated research facility at Pueblo, Colorado. d. the new hours of service for truck drivers, which reduced their productivity.

ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

16. Domestic water carriers have received two major forms of federal promotion. They are: a. research that led to bigger and more powerful tugboats. b. subsidies to plants located on rivers to use barges. c. the work done by the Army Corps of Engineers and the Coast Guard. d. exempting water carriers from regulation and ice breakers on the Mississippi River.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

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17. The Maritime Administration (MARAD) was created to: a. pay subsidies to U.S. flag carriers who were having difficulty competing against foreign carriers. b. ensure employment for U.S. sailors and mariners. c. prevent the economic decline of the U.S. flag ocean carriers. d. address the needs of ship lines and builders wanting federal aid.

ANSWER: c POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Policy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

18. User fees: a. do not impact wasteful use. b. are designed to discourage use of a facility by private firms. c. may equalize intermodal competition. d. encourage private investment.

ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.08 - Appreciate the role of user charges in funding transportation initiatives.

19. Since the economic deregulation of the modes, safety regulations: a. have received greater attention. b. have also been deregulated. c. have been delegated to the states funded with block grants. d. were turned over to the Department of Homeland Security.

ANSWER: a POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

20. What agency was created to secure America from terrorist attacks? a. Coast Guard Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation b. Department of Homeland Security c. The Special Forces d. Federal Bureau of Investigation ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.06 - Obtain a knowledge of past and current regulations affecting transportation.

21. Which legal system is based upon the Roman legal system? a. Statutory law b. Judicial memory c. Common law d. Common market ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.06 - Obtain a knowledge of past and current regulations affecting transportation.

22. What law allowed collective rate making by transportation carriers? a. The Sherman Antitrust Act of 1890 b. The Clayton Act of 1914 c. The Reed-Bulwinkle Act of 1948 d. The Robinson-Patman Act of 1936 ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

23. The Staggers Act of 1980: a. founded two new rail associations. b. eliminated many of the exemptions from antitrust laws. c. abolished the Motor Carrier Act. d. does not exist.

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Chapter 12: Governmental Roles in Transportation ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

24. The Robinson-Patman Act: a. prohibits sellers from practicing price discrimination among buyers. b. was created in 1890. c. came about due to the dot com boom in the 1990s. d. was declared illegal in 2010.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

25. The FAA provides which of the following? a. Aircraft safety rules b. Aircraft construction rules c. Pilot certification d. All of these are correct.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 12.06 - Obtain a knowledge of past and current regulations affecting transportation.

26. What does common law rely upon?

ANSWER: Common law relies upon judicial precedent or principles of law developed from former court decisions.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

27. What is statutory law based on?

ANSWER: Statutory law or civil law is based upon the Roman legal system and is characteristic of continental Europe and the parts of the world colonized by European countries.

POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Regulation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

28. What is a ―per se‖ violation under Antitrust law?

ANSWER: A per se violation is a type of violation that is illegal, regardless of whether any economic harm is done to competitors or other parties.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

29. What is the primary mission of the Federal Motor Carrier Safety Administration?

ANSWER: The Federal Motor Carrier Safety Administration is a non-economic regulatory body whose main purpose is truck safety.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

30. The establishment of transportation policy and the development of transportation is complicated by the number of groups involved. Which groups are involved?

ANSWER: In addition to the Congress and the President, more than 60 federal agencies and 30 congressional committees set transportation policy. Two independent regulatory agencies interpret transport law, establish operating rules, and set policy. The Justice Department interprets laws involving transportation and settles differences between the carriers and the public.

POINTS: 1 Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.01 - Recognize the links among national transportation policy, transportation regulation, and public promotion of transportation.

31. Describe the key provisions of the Interstate Commerce Commission Termination Act of 1995.

ANSWER: Railroad Regulations     

Rail economic regulation is basically unchanged by the ICCTA. The STB has jurisdiction over rates, classifications, rules, practices, routes, services, facilities, acquisitions, and abandonments.

Railroads continue to be subject to the common carrier obligations (to serve, not discriminate, charge reasonable rates, and deliver).

Rail tariff filing is eliminated; railroads must provide 20 days advance notice before changing a rate.

Rail contract filing is eliminated except for agricultural products.

Motor Carriers         

All tariff filing and rate regulation are eliminated, except for household goods and non-contiguous trade (trade between the continental United States and Hawaii, for example).

Motor carriers are required to provide tariffs to shippers upon request.

Motor carriers are held liable for damage according to the conditions of the Carmack Amendment, (i.e., the full value of the product at destination). However, motor carriers can use released value rates that set limits on liability.

The Negotiated Rates Act undercharge resolution procedures are retained and the unreasonable practices defense is extended indefinitely for pending undercharge cases.

Undercharge/overcharge claims must be filed within 180 days from receipt of the freight bill.

The STB has broad powers to exempt operations from economic regulation with the existing exemptions remaining.

Antitrust immunity for collective rate making (publishing the national motor freight classification, for example), is retained.

The motor carrier is required to disclose to the person directly paying the freight bill whether and to whom discounts or allowances are given.

The concepts of common and contract authorities are eliminated; all regulated carriers can contract with shippers.

Freight Forwarders and Brokers    

Both are required to register with the STB. The freight forwarder is regulated as a carrier and is liable for freight damage.

The broker is not a carrier and is not held liable for freight damage.

The STB can impose insurance requirements for both.

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Chapter 12: Governmental Roles in Transportation POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Regulation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

32. What is the role of the executive branch in connection with the establishment of transportation policy?

ANSWER: Many departments within the executive branch of government influence (establish) transportation policy. At the top of the list is the office of the president. The president has authority over international air transportation and foreign air carriers operating into the United States. The president also appoints individuals to head the various agencies that influence transportation and the two regulatory agencies-the STB and Federal Maritime Commission (FMC).

The Department of State is directly involved in developing policies regarding international transportation by air and water. The policies and programs designed to encourage foreign visitors to the United States are implemented by the U.S. Travel Service. The Maritime Administration is involved with ocean (international) transportation policy. It determines ship requirements, services, and routes essential to foreign commerce. In addition, international transportation policies and programs are shaped by the Military Sealift Command, Military Airlift Command, and Military Traffic Management and Terminal Service agencies responsible for the movement of military goods and personnel.

On the domestic level, the Department of Energy develops policies regarding energy availability and distribution (fuel and rationing). The U.S. Postal Service contracts for the transportation of the mail; such contracts have been used to promote air transportation as well as motor and rail transportation at other times. The Department of Housing and Urban Development (HUD) consults with the DOT regarding the compatibility of urban transportation systems within the HUD-administered housing and community development programs. The Army Corps of Engineers is responsible for constructing and maintaining rivers and harbors and for protecting navigable waterways.

The DOT, however, is the most pervasive influence of policy at the domestic level. The secretary of transportation is responsible for assisting the president in all transportation matters, including public investment, safety, and research. (See Appendix A at the end of this chapter for a list of agencies within the DOT.) POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

33. Why are the timing and time value of funds important in any capital project analysis?

ANSWER: The timing and time value of funds are important parts of any capital project analysis.

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Chapter 12: Governmental Roles in Transportation Political controversy exists about the choice of the specific discount rate and its application.

Several analytical points can be examined that will shed light on this task. First, the discount rate should reflect the interest cost and impact on the public agency that borrows the initial funds. Second, the rate should become higher in later years to reflect increasing risk, inflation, uncertainty, and forecasting difficulties. This is a conservative practice of private project financial managers, and the logic of it can be applied soundly in a public setting.

Third, the counting of benefits should cease in some future period, even though the project might last longer. This is another practice that is an implicit way of conservatively considering only those benefits within the intermediate term, unless a logical case can be made for an extended period of time. These points are made to ensure that benefit overcounting is minimized.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

34. What is the role of industry associations in connection with policy development?

ANSWER: One facet of national policy development that is often overlooked in the study of transportation is the role of industry associations in shaping national, state, and local promotion, regulation, and policy. These associations exist in most industries, and their focus is to lobby Congress and other influential groups in the government to pass laws that will help their members.

These associations are non-profit entities that derive their powers and resources from member firms. They act on the charges given to them by their members. In transportation, the railroads in the Association of American railroads (AAR) and the motor carriers in the American Trucking Associations (ATA) often meet to resolve matters of equipment uniformity and loss and damage prevention. On the policy side, these associations develop legislative and administrative ruling concepts that favor the collective membership or serve as a united front against proposals perceived to be harmful to the group.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Introduction QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.01 - Recognize the links among national transportation policy, transportation regulation, and public promotion of transportation.

35. Transportation project planning is described as a public activity where purely financial return is not the overriding benefit to be attained. Give the reasons why this activity is a major part of the public activity in the U.S. economy.

ANSWER: Transportation project planning is the process whereby federal, state, or local groups review the movement needs or demands of a region or population segment, develop transportation alternatives, and usually propose or implement an alternative. This process enables the Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation development of new movement processes or allows existing ones to continue in an environment of change.

Transportation project planning is a public activity; purely financial returns and other concerns are not the overriding benefits sought. It is a major part of the public activity in the U.S. economy for several reasons: 1. Public transportation processes can facilitate trade or movement where private actions have not or would not have been enticed to do so for financial gain alone.

2. Various cultural and political benefits often come from projects and programs provided publicly.

3. Transportation planning also lowers the cost of living or reduces the social costs of delay or congestion.

4. Transportation planning provides services that are not remunerative but are deemed socially necessary or desirable.

Transportation planning has been a critical factor at the beginning of the 21st century. There are many areas of transportation investment from which private firms have withdrawn. Many forms of transportation today are no longer economically profitable or compensatory. Urban bus systems, commuter railroads, rail, and urban research and development, and many rail services are examples of transportation forms that would not exist without public sector involvement.

Many forms of transportation require large capital investments that would normally discourage or basically prohibit private investment. Port dredging and development, as well as airport and highway construction, are examples of capital items that are not affordable by the carriers using them. Instead, the ability of a public authority to attract capital enables the asset to be built; cost is recovered through user charges.

Public planning of transportation is generally found in situations where environmental or social needs override financial ones. A major argument used in modern subway construction is that, although the system might not recover its full costs from passenger fares, the city as a whole will benefit by increased access to already existing downtown facilities, including buildings, offices, stores, and water utility systems. Constructing other facilities in developing suburban areas will not be necessary. Also, commuters save money because the subway eliminates the need for a second family auto, long driving, excess fuel consumption, costly parking in downtown areas, and so on. Public planning of transportation involves a different viewpoint and set of objectives than does capital investment analysis in private firms.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.07 - Identify and assess the roles of public promotion in transportation.

36. Discuss the rationale and problems associated with assessing user charges against carriers.

ANSWER: User charges are present in the highway systems in several forms. A major form is the fuel tax. States look to this per-gallon tax as a major revenue source for highway construction and maintenance. The federal government‘s fuel taxes go to the Federal Highway Trust Fund, Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation which is the financing source for the Interstate Highway System. Some states have switched from a per-gallon to a percent of sales price method of fuel-based taxation because, in recent years, the number of gallons of fuel sold has decreased, leaving state agencies with less revenue in times that demand greater highway maintenance. The percent of sales price approach can avoid much of this decline. Another public revenue source is the federal excise tax on vehicle tires. States also obtain revenues through vehicle registration fees. These mostly are assessed on a vehicle weight basis so as to recoup, somewhat, a proportionate share of construction costs related to heavier versus lighter vehicles. Further, some states assess a ton-mile tax (e.g., Oregon). Finally, tolls are a form of user taxes on turnpikes and many bridges.

Two major controversies are taking place with regard to highway user charges. One concerns the Federal Highway Trust Fund. The tax money that goes into this fund is collected primarily for interstate highway construction. Approximately 96 percent of the interstate system has been built, but doubt exists over whether the remaining portions, mostly very costly urban sections, will ever be built. Meanwhile, the fuel tax continues to be collected and accumulated in the fund.

A second problem with user taxes is on the state level. Most states collecting vehicle fees and vehicle taxes only return a portion of them for highway purposes. Some states have earmarked some of these funds for education and other uses. In addition, industry groups continue to seek a greater share of these funds for highway development and improvement.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Planning, Promotion, and Programs QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.08 - Appreciate the role of user charges in funding transportation initiatives.

37. Transportation safety continues to receive significant government attention. Is this linked to economic deregulation?

Explain your answer. What is the intent of federal safety regulations?

ANSWER: With economic regulation being either reduced or eliminated, concerns were raised that carriers might skimp on safety to remain competitive. Critics of deregulation felt that heightening competition with its impact on profits would cause carriers to forgo safety to improve profits.?

The intent of federal safety regulations is to establish the minimum standards to which carriers must adhere. They also cover licensing of transport employees whose duties involve the operation of equipment. Regulations also cover the design of transportation vehicles, including safety equipment.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Regulation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.04 - Appreciate the regulatory roles of federal and state agencies and the courts.

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38. Why was the Department of Homeland Security established? Pick one of its component parts, name and define its role.

ANSWER: After the September 11, 2001, terrorist attack on the United States, the Department of Homeland Security (DHS) was established with the goal of mobilizing and organizing the nation to secure the homeland from terrorist attacks. Its mission is to lead a unified national effort to secure America; to prevent and deter terrorist attacks and protect against and respond to threats and hazards to the nation; and to ensure and secure borders, welcome lawful immigrants and visitors, and promote the free flow of commerce.

DHS is charged with protecting the security of the transportation system encompassing approximately 742 million air passengers (domestic and international), 11 million imported containers, and 11.5 million motor crossings among the U.S., Canada, and Mexico. The DHS transportation security programs and regulations are administered through the Coast Guard (CG), Customs Service (CS), and Transportation Security Administration (TSA).

The Coast Guard patrols the U.S. coastline and internal navigable waterways implementing the various security measures set forth by the DHS. The CG can stop a vessel from entering a U.S. port, board the vessel, and prevent any undesirable freight from being offloaded from a vessel.

The TSA administers the air passenger security-screening processes at U.S. airports. TSA hires and manages the airport screeners and sets forth items prohibited from being carried on board commercial passenger aircraft. TSA is testing various security devices and procedures to ensure the safety of passengers as well as reduce delays resulting from the securityscreening process.

TSA has conducted a transit and rail inspection program with the goal of implementing rail passenger and luggage screening similar to that in the air passenger sector. In conjunction with Amtrak and the DOT, TSA is implementing phase II of a first-time rail security technology study to evaluate the use of emerging technologies to screen checked and unclaimed baggage as well as temporarily stored personal items and cargo for explosives.

The Customs Service has been focusing on implementing security measures for cargo entering the United States. CS has established the 24-hour rule that requires shippers to electronically transmit a description of the cargo to CS 24 hours before loading. CS can block any prohibited cargo items from being unloaded at any U.S. port or airport. CS is working in partnership with shippers to streamline the security paperwork in an attempt to reduce the negative consequences on global commerce entering the United States.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

39. Describe the key government agencies involved in transportation safety and the transportation areas they deal with.

ANSWER: Safety regulations have been established to control the operations, personnel qualifications, Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation vehicles, equipment, hours of service for vehicle operators, etc. The Federal Aviation Administration (FAA) enforces and promulgates safety regulations governing the operations of air carriers and airports. The Federal Motor Carrier Safety Administration (FMCSA) administers motor carrier safety regulations. The National Highway Traffic Safety Administration (NHTSA) has jurisdiction over safety features and the performance of motor vehicles and motor vehicle equipment. The Federal Railroad Administration (FRA) has authority over railroad safety regulations, while the Coast Guard is responsible for marine safety standards for vessels and ports. The newly created Pipeline and Hazardous Material Safety Administration (PHMSA) contains a Pipeline Safety Office that is responsible for hazardous materials standards for oil and natural gas pipelines and a Hazardous Materials Safety Office that manages hazardous materials regulations for all other modes of transportation. The National Transportation Safety Board (NTSB) is charged with investigating and reporting the causes, facts, and circumstances of transportation accidents.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

40. What is the role of regulatory commissions? How do the courts complement that role?

ANSWER: Our regulatory laws are often stated in vague terms, such as reasonable rates, inherent advantages, and unjust discrimination. The roles of the regulatory commission are to interpret the meaning of these terms as they are stated in the law and to develop regulations that define their intent. These regulations, then, are codified and serve as the basis for decisions made by the regulatory commissions. However, these decisions are still subject to the intent of the law and to decisions made by the courts.

Even though the regulatory commission plays a powerful role in regulating transportation, it is still subject to judicial review. The courts are the sole determinants of the intent of the law, and only court decisions can serve as legal precedents under common law. The courts make the final ruling on the constitutionality of regulatory statutes and the interpretation of the regulation. The review of the courts acts as a check on arbitrary or capricious actions, actions that do not conform to statutory standards or authority, or actions that are not in accordance with fair procedure or substantial evidence. Therefore, the parties involved in a commission decision have the right to appeal the decision to the courts.

POINTS: REFERENCES: QUESTION TYPE: HAS VARIABLES:

Over the years, the courts had come to recognize the ICC as an expert body on policy and the authority on matters of fact. This recognition has now been given to the STB. The courts limited their restrictions on ICC and STB authority. The courts would not substitute their judgment for that of the ICC or STB on matters such as what constitutes a reasonable rate or whether discrimination is unjust because such judgments would usurp the administrative function of the commission.

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Chapter 12: Governmental Roles in Transportation STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.02 - Understand the role and importance of national transportation policy.

41. Describe the purpose of transportation policy.

ANSWER: The purpose of transportation policy is to provide direction for determining the amount of national resources that will be dedicated to transportation and for determining the quality of service that is essential for economic activity and national defense. The national policy provides guidelines to the many agencies that exercise transportation decision-making powers and to Congress, the president, and the courts that make and interpret the laws affecting transportation. Thus, transportation policy provides the framework for allocating resources to the transportation modes.

The federal government has been a major factor in the development of transportation facilities – highways, waterways, ports, and airports. It also has assumed the responsibility to:    

Ensure the safety of travelers; Protect the public from the abuse of monopoly power; Promote fair competition; Develop or continue vital transportation services; balance environmental, energy, and social requirements in transportation; and, Plan and make decisions.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.02 - Understand the role and importance of national transportation policy.

42. Describe the key statements on national transportation policy to the railroad industry that were included in the Interstate Commerce Commission Termination Act of 1995 (Public Law 104-88).

ANSWER: In regulating the railroad industry, it is the policy of the United States Government: (1) to allow, to the maximum extent possible, competition and the demand for services to establish reasonable rates for transportation by rail; (2) to minimize the need for Federal regulatory control over the rail transportation system and to require fair and expeditious regulatory decisions when regulation Is required; (3) to promote a safe and efficient rail transportation system by allowing rail carriers to earn adequate revenues, as determined by the Board; (4) to ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers and with other modes to meet the needs of the public and the national defense; (5) to foster sound economic conditions in transportation and to ensure effective competition and coordination between rail carriers and other modes; (6) to maintain reasonable rates where there is an absence of effective competition and where rail rates provide revenues that exceed the amount necessary to maintain the rail system and to attract capital; (7) to reduce regulatory barriers to entry into and exit from the industry; (8) to operate transportation facilities and equipment without detriment to public health and safety; Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation (9) to encourage honest and efficient management of railroads; (10) to require rail carriers, to the maximum extent practicable, to rely on individual rate increases and to limit the use of increases of general applicability; (11) to encourage fair wages and safe and suitable working conditions in the railroad industry; (12) to prohibit predatory pricing and practices, to avoid undue concentrations of market power, and to prohibit unlawful discrimination; (13) to ensure the availability of accurate cost information in regulatory proceedings while minimizing the burden on the rail carriers of developing and maintaining the capability of providing such information; (14) to encourage and promote energy conservation; and (15) to provide for the expeditious handling and resolution of all proceedings required or permitted to be brought to this part.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

43. Describe the key statements for the pipeline national transportation policy included in the Interstate Commerce Commission Termination Act of 1995 (Public Law 104-88): ANSWER: A system that meets the transportation needs of the United States, including the national defense. It is the policy of the United States Government to oversee the modes of transportation and in overseeing these modes: (1) to recognize and preserve the inherent advantage of each mode of transportation; (2) to promote safe, adequate, economical, and efficient transportation; (3) to encourage sound economic conditions in transportation; including sound economic conditions among carriers; (4) to encourage the establishment and maintenance of reasonable rates for transportation without unreasonable discrimination or unfair or destructive competitive practices; (5) to cooperate with each state and the officials of each state on transportation matters; and (6) to encourage fair wages and working conditions in the transportation industry.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Policy QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.03 - Articulate the basis for the regulation of transportation in the United States.

44. What are the various forms of government benefits the domestic air carriers receive?

ANSWER: The domestic air system receives the benefits of several government programs. Foremost is the Federal Aviation Administration‘s (FAA) air traffic control system. This system provides navigation and safety for every aircraft in flight within the United States. The system assesses no direct fee to the airlines for its use and captures its operating expenses from airlines and Copyright Cengage Learning. Powered by Cognero.

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Chapter 12: Governmental Roles in Transportation passengers through user charges.

Another direct airline benefit is the subsidy program. These subsidies generally apply to short and medium non-jet flights to cities that are unable to support high traffic volumes. The subsidy has been a significant support mechanism for regional airlines. In recent years, the growth of commuter airlines has enabled regional airlines to discontinue service to small cities. The Air Deregulation Act of 1978 accelerated this trend, which resulted in a lessened need for regional airline subsidies.

The U.S. Postal Service also provides substantial support to airlines. The prime source of income for airlines during their early years came from this subsidy program. In recent years, mail income has not been as significant, but this subsidy is a major revenue source for the industry.

State and local agencies help promote the airline industry through air terminal development and construction. Terminals represent substantial capital investments and would be difficult for the industry to finance and construct. State and local agencies are able to raise the necessary construction funds at reasonable municipal bond interest rates, often backed by the taxing power of the community. The airlines then rent terminal and hangar facilities and pay landing fees for each flight.

Many aircraft safety matters are handled by the federal government. The FAA provides aircraft construction and safety rules as well as pilot certification. In another capacity, the National Transportation Safety Board (NTSB) investigates accidents so that others might be avoided or reduced through aircraft specifications or flight procedures.

Another indirect form of promotion to the airline industry comes from the military. Defense contracts for military aircraft development often provide direct benefits to commercial aviation in the form of mechanical or navigational aircraft improvements. Without militaryrelated research and development activity, advancements in this area would take place at a slower pace and a higher cost to the private sector.

A last form of airline promotion, which is not found in the U.S. system, is direct government ownership, operation, or subsidy of air service. This is common with foreign airlines that serve the United States. In these instances, African, Asian, Latin American, and many European airlines are subsidized so the countries can operate their airlines for purposes of national defense, have some degree of control over traffic to and from their nations, and gain balance of payment benefits and hard currencies through ticket revenues.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Regulation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 12.05 - Discuss the different types of transportation regulation.

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Chapter 13: Issues and Challenges for Global Supply Chains 1. It is estimated that by 2035, congestion will occur on? a. 20,000 miles of the Interstate Highway System b. 35,000 miles of the Interstate Highway System c. 50,000 miles of the Interstate Highway System d. 70,000 miles of the Interstate Highway System ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.03 - Discuss the economic and competitive challenges being caused by the decaying U.S. infrastructure and the threat to the economic viability of the major modes of transportation in the United States.

2. Which type of vessel call has the highest concentration of container freight? a. Container b. Other freight c. Dry bulk barge d. Dry bulk ANSWER: c POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.02 - Understand why and what factors contributed to the growth and prosperity that was experienced in recent years.

3. What makes up the largest value of shipments in the United States? a. Exports b. Domestic c. Imports d. Great Lakes traffic ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.01 - Appreciate the serious challenges and major issues faced by the current transportation system for continued domestic and global economic growth.

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Chapter 13: Issues and Challenges for Global Supply Chains 4. According to sea intelligence, what is the predicted increased percentage of growth between the Asian and North American trade lane? a. 45% b. 60% c. 62% d. 72% ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.04 - Gain a perspective on the critical role of government leadership and policy to resolve the crisis that exists for our global economy without capital funding for the U.S. transportation system.

5. Which industry(s) below are the most fuel efficient? a. Motor Carrier b. Rail and Air Carriers c. Rail and Water Carriers d. Motor, Air, and Water Carriers ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

6. What was the primary response of carriers when dealing with fuel price increases? a. Increase rates per pound of cargo b. Use of fuel surcharges c. Reduction of capacity d. Increasing capacity ANSWER: b POINTS: 1 DIFFICULTY: Hard REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.10 - Understand the opportunities that transportation carriers will have to improve overall supply chain performance through proactive collaboration and appropriate use of new technology.

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7. Which of the following carriers‘ response to fuel cost increases will need TL carriers to focus on shorter routes? a. Increase fuel surcharges b. Service capacity and network rationalization c. Improve operational efficiency d. Technology used to manage and control equipment effectively ANSWER: b POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.10 - Understand the opportunities that transportation carriers will have to improve overall supply chain performance through proactive collaboration and appropriate use of new technology.

8. By 2035, the congestion on the mainline railroad network is forecasted to increase by: a. 10% b. 25% c. 30% d. 50% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.02 - Understand why and what factors contributed to the growth and prosperity that was experienced in recent years.

9. According to the Bureau of Labor Statistics, the job outlook for logistics professionals is predicted to grow by: a. 13% b. 22% c. 28% d. 50% ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Talent Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.05 - Appreciate the crisis in the gap for supply chain talent, its causes, and solutions.

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Chapter 13: Issues and Challenges for Global Supply Chains 10. The increase of gaseous emissions relevant to climate change and associated with human production and consumption is known as: a. going green. b. sustainability. c. carbon dating. d. carbon footprint.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.06 - Understand why sustainability has become a major objective for businesses and especially for transportation and the potential positive benefits of proactive sustainability strategies.

11. In 2019, according to the American Road and Transportation Builders Association, the cost of congestion on the highways to the U.S. trucking industry is about: a. $5 million. b. $100 million. c. $500.5 million. d. $848.4 million.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.04 - Gain a perspective on the critical role of government leadership and policy to resolve the crisis that exists for our global economy without capital funding for the U.S. transportation system.

12. The cost breakdown between track and property and equipment for growth and modernization of the railroads is: a. 8%/92% b. 18%/2% c. 28%/72% d. 66%/34% ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.01 - Appreciate the serious challenges and major issues faced by the current Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains transportation system for continued domestic and global economic growth.

13. How much is expected to be required by the Highway Trust Fund to maintain existing construction by 2030? a. About $25 billion b. About $50 billion c. About $100 billion d. About $200 billion ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.03 - Discuss the economic and competitive challenges being caused by the decaying U.S. infrastructure and the threat to the economic viability of the major modes of transportation in the United States.

14. Which state passed a rule in 2022 that bans the sale of new gas-powered cars by 2035? a. Minnesota b. Florida c. Colorado d. California ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.07 - Appreciate the impact of new energy sources for the global economy.

15. What are the goals of the SmartWay Transport Partnership? a. Cleaner environment, collaboration, and less efficiency b. Less efficiency and more costly transportation c. Collaboration and more costly transportation d. Cleaner environment, more efficiency, and less costly transportation ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.08 - Discuss the role and objectives of the SmartWay Transport Partnership sponsored by the U.S. Environmental Protection Agency (EPA).

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16. Which method of empty-space reduction maximized capacity by matching shippers of different product densities? a. Sustainability initiatives b. R.F.I.D. technologies c. Consolidation strategies d. Load-matching operations ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.10 - Understand the opportunities that transportation carriers will have to improve overall supply chain performance through proactive collaboration and appropriate use of new technology.

17. What is one approach marketing uses to influence value perception? a. Using smaller packages to save space b. Shipper-to-shipper collaboration c. Filling empty space d. Using larger packages for items ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.06 - Understand why sustainability has become a major objective for businesses and especially for transportation and the potential positive benefits of proactive sustainability strategies.

18. In transportation, the axiom ―Don‘t Ship Air‖ refers to: a. bubble wrap. b. empty barrels. c. air balloons. d. empty space in equipment.

ANSWER: d POINTS: 1 DIFFICULTY: Easy REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.06 - Understand why sustainability has become a major objective for businesses and Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains especially for transportation and the potential positive benefits of proactive sustainability strategies.

19. One major development that has increased volumes of traffic and supply chain movement of gas and oil reserves is called: a. Green Supply Chains b. The Perfect Storm c. Fracking Technology d. Management Technology ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.11 - Discuss how supply chain technology can help transport carriers to improve efficiency and effectiveness for their operations and for their customer‘s costs and service.

20. How have carriers responded to the fuel issue and sustainability? a. Service capacity and network optimization b. Operational efficiency c. Technology d. All are correct.

ANSWER: d POINTS: 1 DIFFICULTY: Hard REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.10 - Understand the opportunities that transportation carriers will have to improve overall supply chain performance through proactive collaboration and appropriate use of new technology.

21. What is one reason for the talent gap in supply chain management? a. Too costly a degree to obtain b. Too many certifications needed c. Technology issues within businesses d. Many are not aware of supply chain management as a professional career ANSWER: d POINTS: 1 DIFFICULTY: Medium REFERENCES: Talent Management QUESTION TYPE: Multiple Choice Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.05 - Appreciate the crisis in the gap for supply chain talent, its causes, and solutions.

22. Fuel price volatility includes which of the following? a. Frequent price changes b. Bad gas mileage c. Intermodal carriers d. None of these is correct.

ANSWER: a POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.10 - Understand the opportunities that transportation carriers will have to improve overall supply chain performance through proactive collaboration and appropriate use of new technology.

23. Why do motor carriers tend to be highly fuel sensitive? a. Poor gas mileage creates inefficiencies. b. Government regulations are superfluous. c. They are sensitive to price increases. d. Rail is so much more fuel inefficient.

ANSWER: c POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

24. What is the top insight researchers found from supply chain employees about their industry? a. It is challenging work. b. It has a competitive salary. c. There is a diverse population. d. They have a clear career path.

ANSWER: a POINTS: 1 DIFFICULTY: Easy REFERENCES: Talent Management QUESTION TYPE: Multiple Choice HAS VARIABLES: False Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains LEARNING OBJECTIVES: LO 13.05 - Appreciate the crisis in the gap for supply chain talent, its causes, and solutions.

25. Which is a reason for the increase in pipeline carrier costs? a. Decreasing energy costs b. Increasing security costs c. Higher intermodal competition d. Less land for pipeline development ANSWER: b POINTS: 1 DIFFICULTY: Easy REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

26. For which type of service has the rail industry seen a significant increase in demand?

ANSWER: Trailer-on-flatcar and container-on-flatcar (Intermodal Services) POINTS: 1 DIFFICULTY: Easy REFERENCES: Transportation Infrastructure QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.02 - Understand why and what factors contributed to the growth and prosperity that was experienced in recent years.

27. One of the positive effects of higher fuel prices is a reduction of fuel consumption and, subsequently, a reduction in what?

ANSWER: Congestion POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

28. What are the goals of the SmartWay Transport Partnership?

ANSWER: The goals include a cleaner environment, more efficiency, and less costly transportation options.

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Chapter 13: Issues and Challenges for Global Supply Chains DIFFICULTY: Medium REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.08 - Discuss the role and objectives of the SmartWay Transport Partnership sponsored by the U.S. Environmental Protection Agency (EPA).

29. What is the most important asset of any organization?

ANSWER: People POINTS: 1 DIFFICULTY: Easy REFERENCES: Talent Management QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.05 - Appreciate the crisis in the gap for supply chain talent, its causes, and solutions.

30. Why is the number of truck drivers expected to decrease?

ANSWER: The growing number of retirees and the limited number of new drivers POINTS: 1 DIFFICULTY: Medium REFERENCES: Talent Management QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.05 - Appreciate the crisis in the gap for supply chain talent, its causes, and solutions.

31. Discuss the cost of congestion in the transportation system.

ANSWER: Congestion has a very real cost. For individuals in major metropolitan areas, congestion eats up time and extra fuel. In addition, that increased time spent in congested traffic means less time with family and friends (social costs), less time for leisure, and less time for healthy activities.

The business cost of congestion is also very real. For instance, Nike estimates that the company carries an extra $4 million in inventory to account for congestion delays. On the global scene, one day of delay on the eastbound trans-pacific traffic lanes causes American President Line an additional $4 million per year. It is estimated that U.S. highway congestion doles out an additional 250 million hours of delay to highway truckers, at a cost of $7 billion a year.

POINTS: DIFFICULTY: REFERENCES:

What does this all mean? Higher rates, for trucks (13%), for rail (25%), and for air (11%).

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Chapter 13: Issues and Challenges for Global Supply Chains QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.03 - Discuss the economic and competitive challenges being caused by the decaying U.S. infrastructure and the threat to the economic viability of the major modes of transportation in the United States.

32. Describe the impact of congestion on the rail system.

ANSWER: The advent of trailer-on-flatcar (TOFC) and Container-on-flatcar (COFC) has added significantly to rail congestion. Although these modes have taken traffic off the highways very efficiently, the rail infrastructure still needs to be expanded to keep pace with the increased traffic. The TOFC and COFC are now a large portion of revenue and traffic.

Additionally, the rail infrastructure is negatively impacted by seasonal surges in demand for freight. These factors are made more negative by the fact that the mainline rail network has reduced by almost 50% between 1960 and 1980.

All told, it is expected that congestion on the rail system will continue and become increasingly negative unless something is done to increase capacity. The railroads have made a special effort to invest in their infrastructure.

A potential solution for the rail congestion is the construction of a double track to accommodate two way traffic. To do so would involve major investments and most likely require the support of government funding. Ironically, this was commonplace prior to WWII. But these assets were disbanded for economic reasons, such as an inability to compete with motor carrier traffic.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.03 - Discuss the economic and competitive challenges being caused by the decaying U.S. infrastructure and the threat to the economic viability of the major modes of transportation in the United States.

33. Describe waterway congestion and the role of infrastructure.

ANSWER: The waterways system comprises two major components: the inland and ocean/port systems.

Both of these systems are experiencing issues with congestion and a need for more spending on infrastructure.

The inland waterway system is a collection of channels, locks, waterways, and canals; issues with aging infrastructure and limited capacity are causing routine delays. The average delay per trip for barge traffic is more than one and a half hours. In general, more than 31 percent of lock traffic is delayed.

These delays are further exacerbated by the inability of the infrastructure to deal with predictable weather issues, like flooding, ice, and drought.

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Regarding the ocean system, the major source of delays comes from the limited capacity of the major deep draft ports. This is particularly true with the west coast ports, as trade has increased with Asian countries. In addition to coastal ports, inland ports also deal with capacity issues.

A significant issue for port traffic is the time it takes to unload a large container ship and the limited number of facilities that can accommodate the largest of these ships.

The improvement of the Panama and Suez Canals will generate more traffic for East Coast U.S. Ports and should help to reduce this congestion of West Coast Ports.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Transportation Infrastructure QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.03 - Discuss the economic and competitive challenges being caused by the decaying U.S. infrastructure and the threat to the economic viability of the major modes of transportation in the United States.

34. What is meant by a green supply chain?

ANSWER: Going green, once a term that referenced fringe environmental groups, is finding more emphasis among firms when it comes to transportation. Initially, it was assumed going green would mean increased costs. However, it appears that is not the case. Shippers under pressure to reduce emissions have found innovative ways to do so, at the same time reducing costs by using routing technology and shipping fuller loads.

Reducing fuel consumption has a positive impact on reducing carbon emissions. Clearly, since the oil price spike of 2008, there is increased and continuing interest in reducing consumption.

In addition, firms are looking for ways to reduce the volume of waste/excess packaging, while keeping in mind design and damage protection. Common marketing practice is to use ―bigger is better‖ packaging to increase sales, but less and lighter packaging can reduce costs and waste.

POINTS: DIFFICULTY: REFERENCES: QUESTION TYPE:

Companies are also doing more to maximize both load weight and volume to avoid shipping air or empty space. Lastly, firms are thinking about the amount of water they ship and looking for ways to delay adding water back closer to final consumption (regional bottling companies) and reduce the amount of water in a product (reducing the water in liquid detergents). Numerous other green efforts exist, from long-life and more energy efficient light bulbs to hybrid (clean fuel) tractors. For example, TMS systems have reduced truck miles while increasing load size.

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Chapter 13: Issues and Challenges for Global Supply Chains HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.06 - Understand why sustainability has become a major objective for businesses and especially for transportation and the potential positive benefits of proactive sustainability strategies.

35. Discuss the term carbon footprint.

ANSWER: Some discussion of the term carbon footprint is appropriate at this point. The various media (print, radio, and TV), academics, politicians, and others use it; it has become a part of our vernacular. However, despite its ubiquitous use, definitions vary and are frequently not very specific. The common interpretation is that a carbon footprint is equated with a certain amount of gaseous emissions relevant to climate change and associated with human production and consumption activities. However, there is no consensus on how to measure or quantify the carbon footprint. The spectrum of definitions ranges from direct CO2 definitions to full life-cycle greenhouse gas emissions. There is an emphasis, however, on measuring CO2 emissions directly and indirectly caused by an activity, which is the authors' preference.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Sustainability: Going Green with Transportation QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.06 - Understand why sustainability has become a major objective for businesses and especially for transportation and the potential positive benefits of proactive sustainability strategies.

36. Discuss issues with supply and demand of fuel.

ANSWER: Since the embargos of the 1970s, the world has been on notice with respect to the supply of crude oil and its continuing demand. Demand has been growing steadily and has outpaced discoveries of new sources of supply until recently. This issue was further complicated by the fact that crude is produced in distant countries, yet a disproportionate amount of demand is in the U.S. These supply and demand complexities resulted in crude prices increasing 113 percent between 2005 and 2008. During 2008, crude hit a high of $137.11 a barrel. And while the global recession has abated those price increases, most are convinced that as economies recover, so will the price of crude.

New technology has allowed companies in the U.S. and Canada to drill in areas not considered economically viable in the past. This has changed the dynamics of the oil industry by increasing output and lowering costs.

POINTS: 1 DIFFICULTY: Hard REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

37. Discuss the impact of fuel price instability on motor carriers.

ANSWER: The motor carrier industry has an incredible demand for fuel and is, therefore, highly sensitive to price increases. The motor carriers consume more than 54 billion gallons of fuel, and 7% of that is diesel. The cost of fuel approached the annual cost of labor for the motor carrier industry, which is the largest industry expense. The current lower prices have changed this situation.

During the period of fuel price escalation, the use of fuel surcharges helped the industry cope.

However, not all companies were able to manage this expense properly, and a number went out of business. Passing off increased fuel charges was difficult for the truckload carriers, who are able to be competitive by having lower profit margins. The current situation with respect to the supply and demand of oil and the location of the new sources has mitigated the instability to some extent.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

38. Describe the impact of fuel on the airline industry.

ANSWER: Airlines are the most intensive users of fuel. Fuel is the airline industry‘s largest expense.

Traditionally, fuel was 12 to 15 percent of the airline's operating cost, which grew to 30 percent by 2007. Like the motor carriers, the airlines have added fuel surcharges to deal with this disproportionate price increase. The heavy fuel use of the airline industry has driven cargo capacity away from the air and toward the ground for distances up to 1,500 miles. The new lower oil prices will alleviate this problem.

The high fuel prices negatively impacted passenger movement. For most, airline competition is based on prices between major hubs. This demand for increased efficiency has resulted in airlines reducing capacity (e.g., smaller aircraft, elimination of some flights) and has led to some bankruptcy filings among the airlines. Most of these bankruptcies can be traced back to higher fuel prices. Airlines are nervous about the future as they are very sensitive to fuel price increases. Again, the lower fuel costs will change this pattern and reduce their anxiety level.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in Copyright Cengage Learning. Powered by Cognero.

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Chapter 13: Issues and Challenges for Global Supply Chains the 21st century with increased competition and changes in energy sources.

39. Discuss the impact of fuel prices on water carriers.

ANSWER: Water carriers are very efficient with respect to fuel. However, when fuel costs double, they hardly go unnoticed. When fuel hit a high in 2008, water carriers were faced with fuel costs up to 60% of the ship‘s operating costs. In addition, the marine carriers are also impacted by fuel surcharges when they subcontract with motor carriers as part of an intermodal operation.

Water carriers became more aggressive in managing fuel expenditure and hedging against fuel price increases. Again, the current supply and demand for oil has been beneficial to the water carrier industry.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

40. Discuss the impact of fuel prices on rail carriers.

ANSWER: Rail carriers did not experience the same level of cost pressure as other modes during the price escalation period. This was due to the rail‘s fuel efficiency, which provided increased profitability and traffic during increased fuel prices. These profit levels were attributed to rate increases, fuel surcharges, and added efficiency. The rail industry added traffic during high fuel cost periods because shippers were interested in the increased fuel efficiency of intermodal operations such as trailers on flatcars and containers on flatcars. Much of this traffic remained even after fuel prices were reduced. Rail carriers are moving more oil with the development of new oil wells.

POINTS: 1 DIFFICULTY: Medium REFERENCES: Fuel Cost and Consumption QUESTION TYPE: Essay HAS VARIABLES: False STUDENT ENTRY MODE: Basic LEARNING OBJECTIVES: LO 13.09 - Develop insights into the special challenges that transport companies will face in the 21st century with increased competition and changes in energy sources.

Copyright Cengage Learning. Powered by Cognero.

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