Consider the market for wall-board (the material used to build walls in residential houses). The wall-board industry is characterized by perfect competition. The figure below at left presents the average cost (AC), average variable cost (AVC) and marginal cost (MC) for a typical firm in the industry. The figure below at right represents the industry demand curve (D), the initial short-run supply curve (SSR) and the long-run supply curve (SLR). Initially the market is in both short- and long-run equilibrium.

$ p* Typical Firm MC AC $ D AVC Market q* Q* SSR SLR