Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a lower long-run price, we know that

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In an increasing-cost industry, the long-run average cost curve is upward sloping, meaning that firms experience higher costs as the industry output increases. As demand decreases and the industry output decreases, the long-run price also decreases. This implies that firms are facing higher costs and have to lower their prices to remain competitive. Since the industry is in long-run equilibrium, all firms are earning zero economic profit. Therefore, some firms will start making losses and eventually exit the industry, leading to a decrease in industry output and a rise in long-run price. However, the price will not return to its original level, as the industry has experienced a decrease in demand.

Suppose a Perfectly Competitive Industry Is in Long-Run Equilibrium