Suppose a competitive market has a horizontal long-run supply curve and is in long-run equilibrium.If demand decreases,we can be certain that in the short-run,

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In the short run, firms will continue to produce at their current level, since they cannot adjust their capital or technology. Therefore, a decrease in demand will lead to an excess supply of goods, resulting in a fall in price. If the price falls below the average total cost for some firms, they will operate at a loss and may choose to shut down. However, since the market has a horizontal long-run supply curve, firms that remain in the market will not exit in the long run.

Suppose a Competitive Market Has a Horizontal Long-Run Supply Curve