Detail

As we saw in the previous question, the increase in demand lead to short run profits. In perfect competition free entry guarantees that short run profits will lead to entry in the long run, as new firms enter due to the profitability of the industry. Entry is shown by a shift out in supply.

24. Again refer to Figure 4. Over time the supply curve shifts to S₂. This is due to:

An increase in the cost of an input. This would shift a supply curve back not out and would be a short run shift.
Firms leaving the industry due to the fact that firms were operating at a loss. Firms leaving would shift back or decrease supply. In any case firms in this industry were earning profits, not operating at a loss.
Firms leaving the industry due to the fact that firms were earning positive economic profits. Firms leaving would shift back or decrease supply and they would never do so due to profits.
Firms entering the industry due to the fact that firms were earning positive economic profits.
Firms entering the industry due to the fact that firms were operating at a loss. While this would be an increase in supply, firms don't enter an industry in which losses are being incurred.