Which of the following statement/statements are true in a perfectly competitive market, when there is free entry and exit of firms?

Statement 1: The equilibrium is at a point where the demand curve cuts the price = min AC (Average Cost) line.

Statement 2: Due to a shift in demand curve leftwards, the equilibrium quantity and number of firms decrease whereas the equilibrium price remains unchanged.

Both the statements are true.

Graphically, the market will be in equilibrium at the point where the demand curve intersects the price = minimum AC (Average Cost) line. For a leftward shift of the demand curve, there will be excess supply at the given price. Due to this, some firms, which will be unable to sell their desired quantity at given price, will wish to lower their price. The price tends to decrease which will lead to the exit of some of the existing firms and the price will again reach initial level. Here, the new equilibrium number of firms will be less due to the exit of some existing firms