The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
A) positive externality
B) demand-side market failure
C) supply-side market failure
D) all of these

Question

Quizplus · Accepted Answer

This is an example of supply-side market failure, as the Transcontinental Railway Company is not taking into account the negative externalities that their actions are causing, and are not paying for the damage they cause to others' property.

The Trains of the Transcontinental Railway Company, When Shipping Goods