Final answer:
A free rider is a type of market failure because people can benefit from public goods without contributing to their costs, leading to underinvestment in those goods.
Step-by-step explanation:
A free rider is a market failure because individuals have an incentive to avoid paying for public goods and instead benefit from the purchases of others. Public goods are non-rivalrous and non-excludable, which means one person's use of the good doesn't reduce its availability to others, and it's difficult to prevent anyone from using the good once provided. Due to these characteristics, free riders can exploit the system, leading to underinvestment in the public good because the costs and benefits are not aligned. The free rider problem is analogous to the prisoner's dilemma, a situation where individuals, acting in their own self-interest, fail to produce an optimal outcome for the larger group.