Problem A [50 points] Suppose the following equations can describe the market for widgets: Demand: P = 10 - Q Supply: P = Q - 4 where P is the price in dollars per unit and Q is the quantity in thousands of units. Then: 1. What are the equilibrium price and quantity? [10 points] 2. Suppose the government imposes a tax of $1 per unit to reduce widget consumption and raise government revenues. a. What will the new equilibrium quantity be? [10 points] b. What price will the buyer pay? [5 points] c. What amount per unit will the seller receive? [5 points] 3. Suppose the government has a change of heart about the importance of widgets to the American public's happiness. The tax is removed, and a subsidy of $1 per unit granted to widget producers. a. What will the equilibrium quantity be? [5 points] b. What price will the buyer pay? [5 points] c. What amount per unit (including the subsidy) will the seller receive? [5 points] d. What will be the total cost to the government? [5 points]