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?

Answer: Supply-side market failure

Explanation: Market failure exists due to inefficiency or distortion in the distribution of goods and services in a free market such that there is disequilibrium. Market failure may result from monopoly, government policies or regulations and so on.

Supply side market failure means distortion in prices of goods and services or trade rules are largely influenced by the producers which is usually caused when there is one or only a few producers of such goods.

Non-payment for damage caused is a supply-side market failure as it shows a distortion in market rules which could be traced to the oath of the supplier.