of
K
in year 0) and against which must be set the stream of future net social benefits
(gross benefits less operating costs) spread over 40 years but discounted to year 0.
Net social benefits will exceed net financial benefits if only because a lower fare
would produce greater social benefits while reducing net receipts. The largest net
benefit occurs when the fare is equal to the marginal operating cost, which varies
throughout the day. But it is less cumbersome to hold the fare constant at average
operating cost (or above average at peak hours, with a concessionary rate for other
times).
Part of the annual gross benefit of the railway is the total receipts expected in each
of the 40 years (say, 50 cents per ride times the number of riders). External benefits
include the difference between 50 cents and the most people are prepared to pay for
alternative road transport (auto, taxi, bus, bicycle, and rickshaw – a human-powered
carriage) and the time, comfort, and safety benefits to riders (or to road users from
less congestion)