Question

Which of the following statements about transportation costs are correct?

A. When transportation costs rise, markets tend to substitute goods that are from closer locations.
B. Transportation costs have declined due to technological improvements for transporting goods.
C. International transportation costs are increasing everywhere in the world except in the United States.
D. Since the 1960s, transportation costs, as a percentage of the value of all U.S. imports, increased twofold.
E. The decline in the U.S. relative cost of international transportation has contributed to a higher volume of trade.

Answer 1

• A. When transportation costs rise, markets tend to substitute goods that are from closer locations.
• B. Transportation costs have declined due to technological improvements for transporting goods.
• E. The decline in the U.S. relative cost of international transportation has contributed to a higher volume of trade.

Step-by-step explanation:

When transportation costs increase, people will try to save on these costs by buying goods from nearby locations instead as these would require less transport.

In general, transportation costs have declined as technological improvements in transport have improved with better rail lines and air shipping routes. In the U.S. this has led to an increase in trade volume because people are able to buy from markets far away from them knowing that they will not have to pay exorbitant prices.