The Adjustment Graphically Initial market conditions MC Price of Wheat ($) S ATC Pe d = MR Break-even D Qe Quantity of Wheat (industry) qe Quantity of Wheat (firm) The Adjustment Graphically European crop failure increases U.S. Demand MC Price of Wheat ($) S1 ATC P2 d2 P1 d1 D2 D1 Q1 Q1 Quantity of Wheat (industry) Higher price creates economic profit q1 q2 Quantity of Wheat (firm) The Adjustment Graphically Economic profit attracts new firms Price fall to break-even MC Price of Wheat ($) S1 S2 ATC d1 P1 D2 D1 Q1 Quantity of Wheat (industry) q1 Quantity of Wheat (firm) The Adjustment Graphically Reaction to losses MC Price of Wheat ($) S ATC ATC Pe d = MR D Qe Quantity of Wheat (industry) qe Quantity of Wheat (firm) The Adjustment Graphically Losses signal for resources to leave the market Supply falls and price increases to break-even Price of Wheat ($) S2 MC S1 ATC P2 P1 d = MR Break-even D Q1 Quantity of Wheat (industry) q1 Quantity of Wheat (firm)
