1.Indicate whether each of the following statements is true, false or uncertain and briefly explain your answer.

(a) If the income tax rate is determined by the majority voting, then the greater is income inequality as measured by the distance between median and mean income, the higher the tax rate. [15 marks]

(b) In an economy with public goods, both the private provision equilibrium and the voting equi- librium are not efficient because the equilibrium quantities of public goods are below the efficient levels due to the free-riding problem. [15 marks]