FIGURE 10-7 Long-Run Equilibrium for a Perfectly Competitive Market: Constant Cost Case An increase in demand from D to D’ causes price to rise from P1 to P2 in the short run. This higher price creates profits, and new firms are drawn into the market. If the entry of these new firms has no effect on the cost curves of firms, new firms continue to enter until price is pushed back down to P1.At this price, economic profits are zero. The long-run supply curve, LS, is therefore a horizontal. line at P1. Along LS, output is increased by increasing the number of firms that each produce q1.