Trucking Business in the United States

Answer the following questions to check your understanding of the story.

How does a rise in the price of diesel change truck transportation service costs in the short run?

A rise in the price of diesel _____________.

a) decreases variable cost and marginal cost, but does not change fixed cost

b) increases variable cost and marginal cost, but does not change fixed cost

c) decreases fixed cost and marginal cost, but does not change variable cost

d) increases variable cost and fixed cost, but does not change marginal cost

Wrong! - If the price of diesel, a variable input in truck transportation, rises, which costs will increase and which will remain unchanged?

That's Right! - Diesel is a variable factor in the production of truck transportation services. As its price rises, variable and marginal costs increase, and fixed cost remains unchanged.

How does a rise in the price of diesel change the price and output of truck transportation services?

The quantity of truck transportation services _________, and the price __________.

a) increases; falls

b) increases; rises

c) decreases; rises

d) decreases; falls

Wrong! - The supply of truck transportation services decreases. How do the quantity and price of truck transportation services change?

Correct! - The supply of truck transportation services decreases. The quantity of truck transportation services decreases and the price rises.

How does a rise in diesel prices affect consumer and producer surplus in the market for truck transportation services?

Consumer surplus __________ and producer surplus __________.

a) increases; decreases

b) increases; increases

c) decrease; increases

d) decreases; decreases

Wrong! - How do a higher price and lower quantity affect consumer surplus, and what is the effect on producer surplus if price rises by less than the marginal cost?

Well Done! - The quantity of truck transportation services decreases and the price rises, so consumer surplus decreases. Producer surplus decreases because price rises by less than marginal cost.

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