Final answer:
The free rider problem occurs with public goods when many can benefit and none can be excluded. This leads to individuals having an incentive not to pay for the good, expecting others to cover the cost, which could result in the good not being provided at all.
Step-by-step explanation:
The free rider problem arises when there are many beneficiaries of a public good and exclusion of any one of them is impossible. This situation implies that individuals can benefit from a good without paying for it, and if everyone acts as a free rider, the public good may never be provided. This is because public goods are characterized by being nonexcludable and nonrivalrous, meaning they can be used by everyone without diminishing the amount available to others (nonrivalrous) and it is difficult or impossible to prevent anyone from using them (nonexcludable).
Therefore, the correct option is b. there are many beneficiaries and exclusion of any one of them is impossible. When goods or services like national defense or clean air are involved, private companies find it difficult to produce them as they cannot charge people who benefit from the goods without contributing to their cost.