Final answer:
The free-rider problem in initiating legal action refers to individuals benefiting from a lawsuit without contributing to the costs or effort. Class action lawsuits solve this problem by allowing multiple plaintiffs to join forces and share costs, making it easier to seek compensation or redress.
Step-by-step explanation:
The "free-rider problem" in initiating legal action against a firm refers to the situation where individuals benefit from a legal action without contributing to the costs or effort required for the action. In other words, some individuals may choose not to participate in a lawsuit against a firm because they can still benefit from the outcome without shouldering the costs. This poses a challenge for individuals who want to initiate legal action against a firm.
Class action lawsuits help with this problem by allowing multiple plaintiffs with similar circumstances to join forces and file a single lawsuit against the firm. This mechanism enables individuals to share costs and resources, as well as cover individuals who may not be aware that they have a case. By consolidating similar claims into one class action lawsuit, the burden of legal action is spread among a larger group, making it more feasible for individuals to seek compensation or redress.