If a perfectly competitive firm is experiencing economic losses, what is the primary reason that necessitates its adjustment in production levels?

A perfectly competitive firm experiences economic losses when its total costs exceed its total revenue. This situation often occurs because the price at which it sells its products is lower than the average cost of production. To address these losses, the firm must adjust its production levels by either reducing output or finding ways to lower costs. For example, if a bakery finds that the cost to make each loaf of bread is higher than what customers are willing to pay, it might decide to bake fewer loaves or seek cheaper ingredients. By making these adjustments, the firm aims to minimize losses and potentially return to profitability in the long run.