The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

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In a perfectly competitive industry, firms enter and exit the market based on the profit incentive. If the market is currently clearing at a price above the minimum average cost, then firms are earning a profit and new firms will enter the market. This increase in the number of firms will shift the supply curve to the right, causing the market price to decrease. As the market price decreases, individual firms will decrease their output to continue earning a profit at the new market price. Therefore, the increase in the number of firms will lead to a decrease in each firm's output, but it will also lead to a lower market price that allows all firms to continue earning a profit.

The Market for a Perfectly Competitive Industry Clears at a Price