What is referred to as the free rider problem?

The free rider problem refers to a situation where individuals benefit from a good or service without contributing to its cost. This typically occurs with public goods, which are non-excludable and non-rivalrous, meaning that one person's use of the good does not diminish its availability for others, and it is difficult or impossible to prevent individuals from using the good even if they do not pay for it.

For example, consider a scenario involving public parks or national defense. Individuals enjoy these services without necessarily contributing to their funding through taxes or other means. This lack of financial contribution can lead to underfunding of essential services, as there is little incentive for individuals to pay voluntarily when they can still benefit without doing so. This problem affects the efficiency and sustainability of goods that are supposed to be available to all, leading to potential shortages or decreased quality.

The other choices revolve around different economic concepts but do not capture the essence of the free rider problem, which specifically emphasizes the lack of payment for benefits received.