Which of the following is a public good example that illustrates the free-rider problem?

• A. National defense is a public good because benefits are non-excludable and individuals may underpay.
• B. Street lighting is a private good that is excludable.
• C. A toll road is a private, excludable good.
• D. A private gym membership is a private club.

Answer: (A)

Public goods are non-excludable and non-rival, meaning you can’t easily prevent people from benefiting and one person’s use doesn’t reduce another’s. That setup creates a free-rider problem: individuals can enjoy the good without paying, so a private market tends to underprovide it. National defense is a classic example because it protects everyone in the country regardless of who pays, making it hard to charge each person directly. As a result, people rely on others to fund it, and the market by itself wouldn’t supply an optimal level without government funding.

The other options describe goods that are excludable or private, so they don’t illustrate the free-rider problem in the same way: street lighting is described as private and excludable here, toll roads are private and excludable, and a private gym membership is a private club. These do not embody the non-excludable, non-rival nature that gives rise to the free-rider issue.