Final answer:
The free rider problem occurs when individuals can use public goods without contributing to their cost, causing a market failure as private firms cannot charge for these nonexcludable and non-rival goods. Governments often need to step in to provide such goods through public means.
Step-by-step explanation:
The free rider problem is indeed a primary source of market failure in the provision of nonexcludable public goods. It arises because these goods are nonexcludable and non-rival, meaning they are accessible for all without a direct payment, and one person's use does not deplete the good's availability to others.
Consequently, people can benefit from the good without contributing to its cost, leading private companies to under-provide public goods due to the inability to charge all users adequately. Governments often intervene to address this shortfall by providing public goods through taxation and public provision.