The production of transport services in most modes involves joint and
common costs. A joint cost occurs when the production of one good
inevitably results in the production of another good in some fixed
proportion.Common costs arise when the facilities used to produce one transport
service are also used to produce other transport services (e.g. when
track or terminals used to produce freight services are also used for
passenger services). The production of a unit of freight transportation
does not, however, automatically lead to the production of passenger
services. Thus, unlike joint costs, the use of transport facilities to
produce one good does not inevitably lead to the production of some
other transport service since output proportions can be varied.
The presence of economies at the relevant range of firm size means
that the larger the size of the firm, the lower the per-unit cost of
output. These economies of scale may potentially take a variety of forms
in transportation services and may be thought to vary significantly
according to the mode of transportation involved.
Apr 21st, 2015
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