Task 1: Draw the marginal cost curve and the average total cost curve of a wet milling ethanol plant. Assume that

the overhead cost is not recoverable if the plant shuts down temporarily.

Task 2: Draw the marginal cost curve and the average total cost curve of a dry milling ethanol plant.

Task 3: ADM's Peoria plant is a wet-milling plant. Suppose the price of ethanol were $1.02 per gallon. Would ADM wish

to temporarily suspend operations (shut down) at the Peoria plant? What is the minimum ethanol price at which

operating the Peoria plant is optimal for ADM?

Task 4: Draw the current short-run industry supply curve for ethanol.

Task 5: Verify that the current equilibrium price of $1.53 is consistent with the short-run supply curve you derived

above, combined with the demand function Q = 46.1 20P,where Q is billions of gallons per year.

Task 6: Suppose the demand for ethanol changes to Q = 23.05 10P. What do you predict will be the new price in the

short run? How much ethanol will be produced in the new short-run equilibrium? How much will be produced by dry

milling plants? Wet-milling plants?