Test bank Chapter 4 Multiple Choice 1. During 1997, railroads carried what percentage of the total intercity freight traffic? a. 47 percent b. 39 percent c. 51 percent d. 25 percent 2. Which is considered to be largely responsible for the reduction in railroad line trackage and mileage? a. Popularity of the use of trucks for the transport of freight b. better rail technology increasing equipment utilization c. negative government policies and shipper apathy d. abandonment of duplicate trackage and ail merger activity 3. which is a major reason for the decline in the number of rail companies? a. competition from foreign transportation companies b. the growth of the interstate system c. government restrictions on rail ownership mergers and unification d. desire of management to invest in other areas of business 4. what do the majority of rail movements involve? a. manufactured goods b. bulk liquids and coal c. low value, heavy commodities d. consumer goods 5. 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 c. oversize and over-dimension shipments d. coal and chemicals 6. railroad car loadings 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
7. the basic unit of measurement for railroad freight handling is known as the a. unit load b. carload c. freight load d. capacity load 8. which type of railroad car has the greatest numbers in service? a. tank car b. covered hopper c. flat car d. gondola 9. which railroad category owns the greatest percentage of rolling stocking in use? a. Class I railroads b. Federal government for military moves c. Private car leasing firms and shipper d. Investment and financial firms 10. COFC is the international form of transportation of containers. COFC equivalent to which type of domestic movement? a. intramodel b. unit train c. TOFC d. roadrailer 11. which best characterizes the short-run cost structure of the railroads? a. low variable costs, high direct separable costs b. low fixed costs, low variable costs c. low joint costs high separable costs d. large proportion of indirect fixed costs 12. which is an important factor making rail intermodal movements with LTL motor carriers attractive? a. low fees to arrange for piggyback traffic b. Teamster's agreements to allow truckers to put up to 28 percent of their trailers on the railroad c. the all weather speed of the railroad d. motor carriers buying trailers that can move by rail 13. 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. Limited capital investments by the railroads
14. rail intermodal traffic expanded 97 percent between 1981 and 1996, with rail productivity measure also showing an increase, which is an important indicator of rail's improved performance? a. decreased loadings of boxcars b. lower fixed costs in relation to variable costs c. continued improvement in safety and better performance d. increase in investment for new cars and locomotives
15. what types of mergers occurred in the rail industry? define each and discuss. What has been the result of this activity after the passage of the Staggers Rail Act? ANSWER: the first mergers were side-by-side and 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 intermodal competition. Customer service and reliability can be improved by these mergers, since the many types of operating costs, such as car switching and clerical costs, such as record keeping can be bought under control. After passage of the Staggers Rail Act, the merger trend accelerated. Because of these mergers, there are only four major railroads. 16. the railroads can claim a number of advantages that rail services provide, such as a large carrying capacity, assumption of liability for shipments, and an increased use of technology for providing services. However, a number of factors contribute to minimizing these advantages. Discuss these factors. ANSWER: Rail service is constrained by fixed right-of-ways that contribute to varying degrees 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, carrier are regionally located and through shipments must be interchanges between carriers. The multiple handling of shipments create delivery delays, as well as a higher incidence of loss and damage. Rail is a primarily a long-haul mode, making it difficult to provide cost-effective short-haul service. The mode hopes to expand service into short-haul markets and selected lanes. 17. 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 right-of -ways. Initially, a large capital investment is required, and annual maintenance costs greatly reduce earnings. Another element is reflected by the extensive investment in private terminal facilities. Included are freight yards, terminal areas and sidings. Passenger stations may be included. The investment for equipment for rail transport is another major cost element. This includes investment for locomotives and various types of rolling stock.
18. Abandonments have reduced the total track mileage by 50 percent since 1929. Why did these abandonments occurs? What have been at least two outgrowths of this abandonments trend? Does any government agency oversee railroad abandonments? ANSWER: Overexpansion left extensive amounts of excess trackage in many areas, and the railroads had to abandon significant 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 allowed truck-service to gain speed, which caused shippers to use motor carriers. To effectively compete 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. The ICC, and later the STB, still regulate abandonments but changes in the law made it much easier for the rail road industry to close unprofitable lines. Not all the lines were scrapped as regional and short line operated 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 was concentrated on fewer and fewer routes, overhead costs were spread over more businesses. 19. Intermodal carloadings have been growing at a rate of about 20 percent per year. Piggyback service was designed for increase service levels to intermodal customers. What are the characteristics of this traffic? ANSWER: TOFC service transports highway trailers on rail flatcars, and combines the line-haul efficiencies of the railroads with the flexibility of the motor carriers. Piggyback trains are more economical that truck traffic because fuel savings and rail economies of scale are realized. COFC is the international transport of containers and is equivalent to domestic TOFC movements. Handling is reduced because the containers are loaded at origin and shipped directly to the receiver. Containerization reduced packaging and warehousing costs, and faster transit times result from the time and effort saved in the loading, unloading, and delivery of goods. 20. 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 right-of -ways. Initially, a large capital investment is required, and annual maintenance costs greatly reduce earnings. Another element is reflected by the extensive investment in private terminal facilities. Included are freight yards, terminal areas and sidings. Passenger stations may be included. The investment for equipment for rail transport is another major cost element. This includes investment for locomotives and various types of rolling stock.
21. 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 attempted to maintain freight service in the Northeast by Creating the Consolidated Rail Corporation, which as formed from six bankrupt northeastern railroads. The act also created the USRA as the government agency responsible for planning and financing the restructuring. By 1980, the federal government has granted Conrail 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 stock in 1992. 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. The Railroad Revitalization and Regulatory Reform Act of 1976 was the first attempt to deregulate the industry since the railroads had come 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 ratemaking. Although the 4R Act was an attempt to deal with regulatory problems, the ICC's interpretation of the act negated much 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 their return on equity is very low (about three percent) compared to any 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 railroad, have continuously improved their financial situation during the 1980s. The ICC Termination Act of 1995 eliminated the ICC and transferred economic regulation to the Surface Transportation Board, 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 marketi pressures more that economic regulations.