Economics Today 18th Edition by Roger LeRoy Miller

تمرين 1

Reaching the Short-Run Shutdown Point in the Ethanol Industry
Geoff Cooper, vice president for research and analysis at the Renewable Fuels Association, looks again at data on the prices of corn and ethanol, a fuel blended with gasoline used in most vehicles. A drought has wiped out part of the U.S. corn crop, which consequently will be at least onethird smaller than in the prior year. Thus, the market clearing price of corn has jumped significantly, from just over $4 per bushel to close to $7 per bushel.
In the past, the production of ethanol has required close to 40 percent of the nation's corn crop. Cooper knows that ethanol producers will not purchase nearly that share of the corn crop this year, though. The average cost of corn required to produce a gallon of ethanol has now risen above the market clearing price of ethanol. In response, ethanol firms in 13 different states have shut down operations at 25 of the nation'S₂11 ethanol-producing plants. Cooper releases a statement to the press: "If we get back to a normal climate pattern and a normal corn crop, then I think the industry is in good shape," the statement reads. "But if this drought persists and it has the same effect on this coming corn crop, then we've got a problem." So far, Cooper knows, ethanol firms are keeping their plants in place and only temporarily laying off some of their employees. If corn prices do remain as high next year, however, continuing losses likely will lead firms to close plants permanently and dismiss many of their workers.
Below what type of short-run average cost has the price of ethanol fallen?