how does a decrease upset the long run equilibrium?
Assume the average firm is in initial equilibrium with p (200) +MC = ATC and producing 100 units. Assume that the industry is equally in long-run equilibrium at P=$200 and Q=100 000, since all firms are just breaking even. The demand curve is D1 D1. Demand now decreases to D2D2 (shift to the left) causing the price to drop to P=$180. This induces each firm to decrease output to Q90. With p=180, a loss is now being sustained, indusing exit until industry supply has decreased to S2S2, bringing the price back up to P=200. The industry is back in long- run equilibrium, but with supply not at Q=90000