Question

2. No need to redo this one if you turned it in early! Assume the self-storage industry is constant cost and perfectly competitive. A typical firm has a "storage yard containing, on average, 500 rental compartments, garage-like vaults in which to store golf clubs, skis and old clothing." See the photo on the next page. The following shows the cost curves for Airport Storage, a firm in the market, and the inverse demand and supply curve for the entire self-storage market. Airport Storage Self-Storage Market MC ATC AVC Q Market a. Label the market price and quantity b. If Airport Storage is one of many identical firms, how many total identical firms are in this market? To figure this out, consider the profit maximizing quantity, q, for each firm at a given price. Compare that to the market output, Q. at the same price. c. Label Airport Storage's marginal revenue curve, short run supply curve, and demand curve. d. Assuming the market is in long run equilibrium AND Airport Storage experiences constant returns to scale (CRTS) in the long run, draw and label the long run average total cost curve A Lansing State Journal article describes this market as: "a "super-fragmented" playing field in which tens of thousands of relatively minor storage operators, including more than 27,000 stand-alone "mom and pops," compete against a handful of goliaths that control hundreds of locations apiece." e. Based on this quote and any other relevant information, is constant returns to scale likely in the self-storage market?