(a) The original long-run equilibrium for an industry is (P₁, Q₁) at the intersection between the long-run supply curve S_LR and the original demand curve D₁. After a change in tastes, demand increases to D₂, price increases to P₂, and firms earn positive economic profits in the short run. In the long run, new firms enter the industry, shifting the short-run supply curve to S₂ until it reaches the long-run equilibrium price P₁ at the new equilibrium quantity Q₂.(b) At the long-run market price P₁, the representative firm earns zero economic profit and produces quantity . When market demand rises, the market price increases to P₂ and the firm’s output increases to . At this combination, the firm earns positive economic profit. As entry into the industry occurs, the price falls back to P₁, and the firm reduces its output to . At this point, the firm earns zero economic profit.