FIGURE 10-8 Increasing Costs Result in a Positively Sloped Long-Run Supply Curve Initially the market is in equilibrium at P1 Q1. An increase in demand (to D’) causes price to rise to P2 in the short run, and the typical firm produces q2 at a profit. This profit attracts new firms. The entry of these new firms causes costs to the levels shown in (b). With connecting all the resulting equilibrium points, the long-run supply curve LS is traced out.