b. In the long run, economic losses cause some firms to exit the industry, decreasing market supply. Firms exit and supply decreases until losses are eliminated. In a constant-cost industry, the market price returns to its original level of P1. The supply curve shifts to S2 in the right panel, and the market adjusts from point b to point c. The firm’s demand curve returns to its original position as the price rises. Output levels of the remaining firms return to their original levels. Market output drops to Q3 due to a decrease in the number of firms.