Final answer:
The assertion that persisting losses lead to fewer restaurants and higher prices where surviving firms charge more and produce less is false. In a perfectly competitive market, long-term equilibrium will see firms making zero economic profits, adjusting prices to the average cost, not perpetually higher amounts.
Step-by-step explanation:
The statement that persisting losses will decrease the number of restaurants, leading to higher restaurant meal prices, and that surviving firms will adapt by charging higher prices and producing fewer meals to maximize profits is False. In perfectly competitive markets, the long-run equilibrium is achieved when firms are making zero economic profits, which means that firms will neither enter nor exit the market, and prices will reflect the lowest point of the average cost (AC) curve. Persisting losses signal that firms are not covering their costs, leading some to exit the market. This exit will cause the supply curve to shift to the left, initially raising prices. However, as the market stabilizes, the remaining firms will reach a point where prices no longer entail losses but just cover the average costs, again yielding zero economic profits. Higher prices than the average cost would invite new firms to enter the market, and prices would eventually be driven down. Therefore, the idea that firms can continually charge higher prices and produce fewer meals contrary to the principles of a competitive market.