In the long run, firms will enter the industry due to the profits being earned. Entry will continue until profits are zero, meaning supply will shift to S3. Once enough firms have entered to shift supply to this point market price is reduced to P3, equal to minimum ATC.
The new long run equilibrium differs from the old in that there are more firms; therefore, industry
output is larger and price and production costs are lower. As always,
long run equilibrium price in perfect competition is determined by the minimum ATC.
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