If the formation of Lindahl prices to support an efficient level of public goods is derived from individuals' reporting their marginal willingness to pay, people will under-report their true willingness to pay.

Answer the following statement true (T) or false (F)

True

Rationale: Under Lindahl prices, everyone is charged their marginal willingness to pay -- but the overall level of the public good is determined by the sum of all MWTPs. Thus, by underreporting your MWTP, you can lower your Lindahl price without affecting the public good level much. The more individuals there are, the less the public good level will change -- and so the incentive to lie increases as the number of people increases.