Which of the following best represents the free rider problem?

• A. Individuals benefit from a public good without contributing to its cost.
• B. A resource is overused because it is not owned by anyone.
• C. A firm sets prices above marginal cost to maximize profit.
• D. Consumers face higher prices due to government-imposed taxes.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of a public good. Public goods are characterized by being non-excludable (people cannot be prevented from using them) and non-rivalrous (one person's use does not reduce availability to others).
2. Step 2: Define the free rider problem. It occurs when individuals can benefit from a good without paying for it, leading to under-provision or depletion of that good because people have little incentive to contribute.
3. Step 3: Analyze each option in the problem: The first option describes individuals benefiting from a public good without contributing, which aligns with the free rider problem.
4. Step 4: Recognize that the other options describe different economic issues: overuse of a common resource (common-pool resource problem), firms setting prices above marginal cost (monopoly pricing), and consumers facing higher prices due to taxes (tax incidence).
5. Step 5: Conclude that the best representation of the free rider problem is the option where individuals benefit from a public good without contributing to its cost.