There are four equilibrium points (A, B, C and D) in Figure II . An increase in instability (higher r) decreases tax rates in the capital and in the countryside. A dictatorship on the other hand raises taxes in both places. Question: Explain the Intuition behind these results? Figure II Countryside Tax 1.2 1.0 B Countryside Tax' D 0.8 0.6 Countryside Tax A C 0.4 City Tax' City Tax 0.2 T City Tax 0.1 0.2 0.3 0.4 0.5 0.6 FIGURE II Stability, Dictatorship, and Taxes across Space