Public goods are essential resources that are characterized as non-rival and non-excludable, meaning that one person's use does not diminish another's ability to use it, and it is difficult to prevent anyone from using it. However, these goods often face significant challenges, particularly the free rider problem. This issue arises when individuals benefit from a good without contributing to its cost, leading to under-supply in a private market.

To illustrate the free rider problem, consider a fireworks show. If a fireworks display is valued at $10 by each of the 100 residents in a town, the total perceived benefit is $1,000. However, if residents believe they can enjoy the show for free by simply watching from their homes, they may choose not to pay for tickets. This behavior results in a situation where the fireworks show, despite its value, is not funded because individuals opt to free ride rather than contribute financially.

In such cases, the government often intervenes to ensure the provision of public goods. The government can impose a tax to collect the necessary funds, ensuring that the marginal benefit of the good exceeds or equals the marginal cost of providing it. For instance, if the government taxes each of the 100 residents $5, it can raise the $500 needed to fund the fireworks show. This way, the residents still receive a benefit greater than their tax contribution, and the public good is successfully provided.

Ultimately, while some public goods may be provided without government involvement in smaller settings, the general trend is that government action is necessary to overcome the free rider problem and ensure that public goods are available to all. This highlights the importance of collective funding mechanisms in the provision of essential resources that benefit the community as a whole.