Demand for a good falls, and existing firms in a perfectly competitive market start facing economic losses. According to the source, what happens next as firms exit?

1. Falling demand and price push existing firms into economic losses, prompting some to reduce output or exit entirely. 2. As firms exit and stop producing, the market supply curve shifts to the left. 3. That leftward shift in supply pushes the market price back up. 4. As price rises, losses shrink for the firms that remain, continuing until the market returns to zero economic profit. 5. New firms have no reason to enter a market where existing firms are losing money, ruling out that option. _Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.3 | Entry and Exit Decisions in the Long Run_