A well-operated mass transit system in North America is one that obtains at least half its total revenues through the fare box (passenger fares). The remaining revenues are obtained as subsidies from municipal, provincial and federal governments.

a) Draw and explain an appropriate economic model that illustrates the rational for subsidizing mass transit.

b) Subsidies can be given to the transit authority as a lump sum payment (with specific operating rules), or distributed on a per rider basis. Explain the difference in these two methods of payment, and give the advantages and disadvantages of each.

Answer rating: 100% (QA)

a Economic Model for Subsidizing Mass Transit Model Supply and Demand with Externalities Assumptions Mass transit has positive externalities benefits beyond individual users Reduced traffic congestion ... View the full answer