Problem: Each instance that follows is an example of one of the four types of market failure (imperfect market structure; the existence of public goods; the presence of external costs and benefits; and imperfect information). In each case, identify the type of market failure and defend your choice briefly.
1. An auto repair shop convinces you that you need a $2,000 valve job when all you really need is an oil change.
2. Everyone in a neighborhood would benefit if an empty lot were turned into a park, but no entrepreneur will come forward to finance the transformation.
3. Someone who lives in an apartment building buys a Gretchen Wilson CD and then blasts it at full volume at 3 A.M.
4. The only two airlines flying direct between St. Louis and Atlanta make an agreement to raise their prices.