A perfectly competitive market is in long- run equilibrium. Then market demand decreases. The decrease in demand leads to

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In a perfectly competitive market, a decrease in demand will initially lead to excess supply at the current price, causing prices to fall. Firms will then experience lower revenues, and given their fixed costs in the short run, they will incur economic losses. This adjustment process continues until the market returns to a new long-run equilibrium with fewer firms or lower output per firm, but not with firms entering, which contradicts option B, or a rise in price in the short run, which contradicts option C.

A Perfectly Competitive Market Is in Long- Run Equilibrium