Please answer the two questions below:

1. Suppose the government subsidizes production of the electric F-150. Draw two (Gasoline and Electric) new diagrams to show the effects of the subsidy on prices and quantities of both versions.
2. Suppose that instead of subsidizing production of the electric version, the government taxes production of the gasoline version. Draw two (Gasoline and Electric) new diagrams to show the effects of the tax on prices and quantities of both versions.

Suppose Ford sells two versions of the F-150, which is a pickup truck: one that runs on gasoline and the other that is all electric (which Ford refers to as the F-150 Lightning). In reality, Ford sells more than two versions of the F-150, but for this problem let's assume that there are just two versions. The marginal cost of producing the gasoline version does not depend on the level of production. The same is true for the electric version, but the marginal costs are higher for the electric than for the gasoline version. These two diagrams indicate the marginal costs and demand curves for the two versions: Gasoline Electric , Price Price MC, MCgas Quantity Quantity