Final answer:
Rail systems have high fixed costs due to the need for substantial infrastructure and low variable costs as the additional cost of transporting more passengers or freight is minimal. This structure supports economies of scale, particularly in urban areas with high ridership.
Step-by-step explanation:
In considering the modes of transportation with high fixed and low variable costs, rail systems stand out significantly. The reason for this is that rail transportation requires substantial investment in infrastructure such as tracks, stations, and trains, which represents a high fixed cost. However, once these are in place, the cost of transporting additional passengers or freight is relatively low, thus exhibiting low variable costs.
Rail systems, especially in urban transit scenarios, tend to experience significant economies of scale. As more passengers use the system, the cost per passenger diminishes, providing a cost-efficient means of transportation for large numbers of people. Moreover, rail systems often employ electricity-driven vehicles such as light rail or high-speed trains, which can capitalize on overhead wires or third rails for power, further reinforcing their fixed cost structures.
Other forms of transportation like motor, air, and water also have their respective fixed and variable costs, but their operational dynamics differ from rail, with variations in their relative fixed and variable cost structures. For instance, air transportation has high variable costs due to fuel consumption especially over large distances, while water transport has moderate variable costs in comparison.