Figure12-6The Long-Run Market Equilibrium Point E_MKT of panel (a) shows the initial short-run market equilibrium. Each of the 100 existing producers makes an economic profit, illustrated in panel (b) by the green rectangle labelled A, the profit of an existing firm. Profits induce entry by additional producers, shifting the short-run industry supply curve outward from S₁ to S₂ in panel (a), resulting in a new short-run equilibrium at point D_MKT, at a lower market price of $16 and higher industry output. Existing firms reduce output and profit falls to the area given by the striped rectangle labelled B in panel (b). Entry continues to shift out the short-run industry supply curve, as price falls and industry output increases yet again. Entry ceases at point C_MKT on supply curve S₃ in panel (a). Here market price is equal to the break-even price; existing producers make zero economic profits, and there is no incentive for entry or exit. So C_MKT is also a long-run market equilibrium.