Perfect Competition (Long-run Equilibrium) 

As we already know, a perfectly competitive market structure attains freedom to entry and exit. This, therefore results in firms only receiving normal profit in the long run, as opposed to supernormal profit in the short term.

The supernormal profit acts as an incentive for other firms to enter the market, switching factors of production into the prosperous industry, as a result, supply is increased, and thus shifts to the right from MS to MS in the diagram below. This alters the original market price.

*Note: this image is from tutor2u and is not my own.

The new market price (P2) has meant that the individual firm no longer makes supernormal profit where Average Revenue/Marginal Revenue were substantially greater than Average Costs, and is now only making normal profit where AR=MR. This situation is more productively, and allocatively efficient.
Even if the individual firm restricts output as to increase price, the price will not alter.


Note: These notes are formulated with credit to the website Tutor2u, AQA Economics Textbook by Lawrence and Stoddard, and Business Microeconomics by Nutter.