Final answer:
In a long run competitive equilibrium, if there's a decrease in demand, the market price and quantity will eventually fall. Firms will exit the market until the remaining firms can break even at a new lower demand level with a lower price and quantity.
Step-by-step explanation:
When a market in long run competitive equilibrium experiences a decrease in demand and after market adjustments occur, the net change in market price and quantity will both fall, as firms leave the market due to lower profits.
In a long run competitive equilibrium, firms are operating at their most efficient scale, and price equals the minimum of the long-run average cost curve. A decrease in demand will shift the demand curve leftwards, initially creating a surplus at the current price. As a result, the market price will start to fall, leading to lower revenues for firms.
Given that this is a long-run scenario, firms can enter and exit the market freely. So, as profits decrease, some firms will exit the market, reducing supply. This exit of firms will continue until the supply decreases enough to meet the new lower demand at a lower price where firms can break even. This market adjustment leads to a new long run equilibrium with both a lower price and reduced quantity in the market.
Using the law of supply and demand, other scenarios can be analyzed. An increase in demand shifts the demand curve rightward, increasing both equilibrium price and quantity if supply is constant. An increase in supply shifts the supply curve rightward, reducing price and increasing quantity if demand is constant. A decrease in supply shifts the supply curve leftward, increasing price and reducing quantity if demand is constant.