1. A firm producing children's tricycles in a competitive market has the following short run cost structure. Cost data is in $'s. Use the data below to answer the following:

Q	TC ($)
0	150
2	180
4	200
6	214
8	234
10	264
12	304
14	354
16	414
18	484
20	564

a. The MC = ______ at Q = 6. The AVC = ______ at Q = 14. The ATC = ______ at Q = 18.

b. Is it true that the data implies production is subject to the law of diminishing returns? Explain.

c. Explain why when the AVC is increasing it is possible for the ATC to decrease or to increase.

d. Now suppose that this is a perfectly competitive firm. If the market price of a tricycle is $25, how many tricycles should this firm produce and sell.

e. Compute the firm's profits. Compute Seller Surplus (Producer Surplus).

f. True or False and briefly explain: The firm should shut down in the short run if price of the bikes falls to $15.