In a perfectly competitive market, if firms exit due to economic losses, then just as a river adjusts its flow after a dam is removed, what happens to the market price in the long run?

In a perfectly competitive market, when some firms leave because they are losing money, the total supply of goods in the market decreases. This reduction in supply leads to an increase in the market price because fewer products are available for consumers to buy. As the price rises, it eventually reaches a point where the remaining firms can cover their costs and earn a normal profit. For example, if a market for oranges sees some growers exit due to low prices, the remaining growers can charge a higher price for their oranges, balancing the market in the long run. Ultimately, this process helps ensure that firms can survive and produce at a level that meets consumer demand without losses.