A surplus currently exists for a product called widgets. in a free market system, the government must step in and buy any widgets that consumers do not buy in order to eliminate the surplus and establish equilibrium.

False, government intervention is not required. When dealing with a free market system, products tend to sort themselves out through equilibrium. If there are too many widgets their price will fall and consumers and investors will adjust accordingly. The market will solve the problem on its own and the widgets will balance out.