• A 'low cost' airline operates a point-to-point domestic air passenger network, while the competing full-service airline offers a network of domestic and international passenger flights mainly through its hubs airports.

a) Draw and use appropriate economic model(s) to compare and explain the competitive advantages of these two airlines. Outline the customer service advantages and disadvantages of these networks designs in your discussion of the economic model(s).

• Explain the economies of size, distance, and passenger density associated with the use of an aircraft. Where appropriate illustrate your explanations with one or more diagrams.

• The International Association of Bulk Marine Carriers (tramp steamers) is unhappy with the current pattern of the boom and bust price cycles in their industry. They want to form a "shipping conference" like the liner carriers (container ships) to set prices and output. They have asked you to examine the feasibility of forming a cartel, given that international law does not prevent them from creating such organizations.

a) Draw an appropriate economic model(s) and explain whether or not, this industry has the conditions for a cartel organization to be a successful.

b) The bulk marine carriers' customers are raw material shippers (minerals, coal, grain, etc.) that experience demand shifts as the world economy expands and contracts. Would this make a cartel more difficult to manage? Explain.

• Canada has thousands of large and small trucking companies, but only two national railways (i.e. CN Rail and CP Rail).

a) Draw and use appropriate model(s) to explain how competition affects allocative and productive efficiency in trucking and rail.

b. What could the government do to obtain allocative and productive efficiency in the railway industry, and what be the benefit?