Acadec 2026-2027 ECONOMICS - Section 4 (Crammable)

What is transportation economics?

Examines decisions made to build, use, and finance transportation.

Who emerged transportation economics in the late 1950s?

American economist John R. Meyer.

What field did John R. Meyer help establish?

Transportation economics.

What era did John R. Meyer contribute to transportation?

The late 1950s.

What did John R. Meyer study regarding transportation?

How transportation systems are built, used, and financed.

What is derived demand?

Demand for something resulting from demand for another good.

Why is passenger transportation considered a derived demand?

People travel to access activities in different locations.

What drives the demand for freight transportation?

Geography of production, consumption, trade, and energy.

How has e-commerce transformed modern freight patterns?

Created high volumes of small, time-sensitive shipments.

What is departure time choice?

The choice of when a specific trip begins.

What is destination choice?

The choice of where a specific trip ends.

What is mode choice?

The choice of how a trip will be made.

What is route choice?

The specific path chosen for a trip.

What concept shapes departure, destination, mode, and route choices?

Value of travel time.

Which travelers typically have a higher value of travel time?

Higher-income travelers.

What are internal costs?

Expenses paid directly by those operating or using systems.

What are external costs?

Spillover costs falling on non-consenting third parties.

Are traffic congestion and air pollution internal or external costs?

External costs.

What type of investment dominates capital costs in transportation?

Large, fixed, sunk one-time investments.

What costs are included in operating costs?

Ongoing expenses like fuel, labor, maintenance, and supplies.

Are taxes included in social costs of transportation?

No, taxes are only in private costs.

What percentage of total social costs in transportation is external?

29% of total social cost.

What fraction of private commuting costs is travel time and reliability?

Half of private commuting cost.

What is pricing?

Fees or financial incentives assessed on transportation users.

How do private transportation businesses maximize their total profits?

Producing where marginal revenue equals marginal cost.

What is the primary goal of public transportation agencies?

Providing the maximum overall benefit to society.

What is marginal cost pricing?

Setting prices equal to the marginal cost of travel.

What equilibrium is achieved when marginal cost pricing is applied?

Socially optimal equilibrium.

What is first-best pricing?

Marginal cost pricing when congestion externalities are fully internalized.

What is second-best pricing?

Maximizing welfare under real-world constraints and imperfect conditions.

What is congestion pricing?

Dynamic tolls varying with actual or anticipated traffic demand.

When was NYC's congestion pricing implemented?

January 2025.

How much was the peak NYC congestion charge for automobiles?

$9 during peak hours.

What effect did NYC congestion pricing have on traffic speeds?

Increased traffic speeds.

What is a High-Occupancy Toll (HOT) lane?

Lanes using real-time data to adjust toll rates.

Why is average cost higher than marginal cost in transportation?

Large fixed infrastructure costs.

What is Ramsey pricing?

Setting prices higher for travelers with inelastic demand.

Which traveler group pays higher Ramsey prices on airlines?

Business travelers.

Why do leisure travelers receive lower airline fares?

Their demand for travel is more price-elastic.

What is economic regulation?

Government control over prices, market entry, and services.

What causes natural barriers to entry in transportation markets?

Large capital costs.

What is economies of density?

Falling average costs as traffic volume on networks increases.

Which federal agency historically regulated interstate surface transport?

Interstate Commerce Commission.

Which federal agency historically regulated US commercial aviation?

Civil Aeronautics Board.

When did the US pursue widespread transportation deregulation?

Late 1970s.

Which modern ride-hailing services bypassed traditional taxicab licensing rules?

Uber and Lyft.

What standard regulates US automobile fuel economy?

Corporate Average Fuel Economy (CAFE) standards.

What agency enforces motor vehicle emission limits?

Environmental Protection Agency (EPA).

Under what act can the EPA penalize non-compliant vehicles?

Section 207 of the Clean Air Act.

How much have vehicle air pollutants fallen since 1970?

Decreased by 78%.

What act established the national environmental policy framework in 1969?

National Environmental Policy Act (NEPA).

What does NEPA require for major infrastructure projects?

Environmental impact assessments.

What federal agency regulates vehicle design safety standards?

National Highway Traffic Safety Administration.

What act established the Highway Safety Improvement Program in 2005?

SAFETEA-LU.

What must states construct under the Highway Safety Improvement Program?

Strategic Highway Safety Plan (SHSP).

What organization rates US infrastructure condition in fair/poor status?

American Society of Civil Engineers.

What federal account distributes gas tax funds to highways?

Federal Highway Trust Fund.

What is design-bid-build?

Separating design and construction into sequential separate contracts.

Why was the design-bid-build model originally created?

Promote competitive bidding and prevent corruption.

What alternative project model combined design and construction during the 2000s?

Design-build (D-B).

What is a public-private partnership?

Agreement between public agencies and private sector firms.

What is the Rule of Half?

Method estimating traveler welfare changes under linear demand.

In Rule of Half diagrams, what area represents existing users?

Area 2.

In Rule of Half diagrams, what area represents new users?

Area 1.

What is discount rate?

Rate adjusting value of money over time.

What is Net Present Value (NPV)?

Life-cycle project worth expressed in today's dollars.

What is internal rate of return (IRR)?

Discount rate making Net Present Value equal zero.

What must IRR exceed for a project to be accepted?

Minimum accepted rate of return (MARR).

What is minimum accepted rate of return (MARR)?

Lowest interest rate investors will accept.

What is benefit-cost analysis (BCA)?

Method evaluating direct economic impacts of public projects.

What threshold must a project's Benefit-Cost Ratio exceed?

Must be greater than 1.

What threshold must a project's Net Present Value exceed?

Must be greater than 0.

What is economic impact analysis (EIA)?

Measures how projects affect money flow and business.

Does Economic Impact Analysis monetize personal travel time savings?

No, EIA excludes non-monetary time savings.

Does Economic Impact Analysis equal overall economic value?

No, EIA measures broader business ripple effects.