Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 5 Firm Behavior and the Organization of Industry
Chapter 14 of 36 - Firms In Competitive Markets
Section 18 of 22
…
Per Figure 7 panel (a)
In the long run firms enter or exit the market until economic profit is driven to zero.
If price (P) > average total costs (ATC) there are profits, this encourages new firms to enter the market.
If P < ATC there are losses, this encourages some existing firms to exit the market.
…
The process of firms entry into and exit from the market ends when P settles at ATC.
Each competitive firm maximizes profits (or minimizes losses) by choosing a quantity at which P = marginal cost (MC).
Market free entry and exit eventually forces P = ATC.
Therefore at market equilibrium, P = MC = ATC and there is no further market entry and exit.
MC = ATC only when the firm is operating at minimum ATC.
…
Panel (a) shows a firm’s long-run equilibrium lowest cost efficient scale.
P = MC, so the firm is profit-maximizing.
P = ATC, so economic profits are zero.
New firms have no incentive to enter the market and existing firms have no incentive to leave the market.
In a competitive market, with free entry and exit there is only one P consistent with zero profit/loss, it is where P is at the minimum of ATC.
…
Panel (b) shows the long-run competitive market supply curve must be horizontal at the given price.
Any price above minimum ATC would generate economic profits leading to entry of new firms.
This would result in an increase in the total quantity supplied and profit driven back down to zero.
Any price below minimum ATC would generate economic losses leading to exit of existing firms.
This would result in a decrease in the total quantity supplied and losses driven back up to zero.
…
Eventually, the number of firms in a competitive market adjusts so P equals the minimum of ATC, resulting in enough firms and supply to satisfy all the demand at this price.
… …
zero economic profit
zero keizai-teki rieki
ゼロ経済的利益

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