A city council is analyzing two transport-related issues within its region:

I. Private operators do not provide any bus services to remote rural villages because they cannot charge a price high enough to cover their operating costs, leading to a total absence of public transport in those areas.

II. Private vehicle use in the city center is high, causing severe air pollution and congestion because motorists do not pay for the external costs they impose on other citizens.

Which of the following correctly classifies the type of market failure occurring in issues I and II?