Final answer:
An increase in less-than-truckload transit rates is likely to lead a company to decrease its order quantity. The supply of services may reduce when transportation costs rise, similar to how a messenger company would decrease service supply in response to higher gasoline prices.
Step-by-step explanation:
If using less-than-truckload transportation and the transit rate increases, we can expect that a company's order quantity may decrease. This is similar to how a messenger company's operations are impacted by changes in the cost of gasoline, which is one of its main costs. If the price of gasoline falls, delivering services becomes cheaper, which might lead to the company being willing to supply more of its services at any given price, since lower costs correspond to higher profits conversely, if costs rise, they would supply less.
Furthermore, considering the principles of perfect competition and how independent truckers operate, they must take the going rate for their service. If the market price for transportation increases, it is often the case that these truckers, or the company using their services, will have to adjust their operations. This could involve reducing the quantity of goods transported to maintain profitability. Holding total costs constant, if transportation gets more expensive and profits are affected at every output level, a company is likely to manage its costs by optimizing order quantities.
In essence, higher transportation costs might necessitate a reduction in the frequency or size of orders to maintain economic efficiency. This would be akin to a firm in a competitive market adjusting its production according to changes in market price, where it increases production up to the point where the new price equals marginal cost, as illustrated by the hypothetical quantity of 90.