Asked by Gisselle Ochoa on Jun 14, 2024
Verified
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.
Supply-Side Market Failure
A situation where the production of a good or service does not take into account the full cost of its impact, leading to overproduction or underproduction.
Transcontinental Railway
A railroad system that crosses an entire continent, connecting distant locations and facilitating transportation and trade.
Sparks
In a general sense, sparks refer to small particles or flashes of light created by a sudden disruption or collision, often related to electricity or fire.
- Scrutinize the market's dysfunctions that stem from complications on the supply and demand sides.
- Understand the impact of externalities on market efficiency.
Verified Answer
DO
Dominique OglesbyJun 20, 2024
Final Answer :
C
Explanation :
The scenario described is an example of supply-side market failure, as the Transcontinental Railway Company is not accounting for the full cost of their production, including the damage caused by their emissions. This leads to an inefficient allocation of resources. Positive externality and demand-side market failure do not accurately describe this situation.
Learning Objectives
- Scrutinize the market's dysfunctions that stem from complications on the supply and demand sides.
- Understand the impact of externalities on market efficiency.