Under perfect competition, the price line is determined by the intersection of the market demand curve and the market supply curve. The price line is horizontal because the firm is a price taker and cannot influence the market price. The average cost curve of the firm represents the minimum average cost at which the firm can produce a given level of output.

If the price line lies below the average cost curve, the firm would incur losses because it is not able to cover its total costs, including fixed costs, with the revenue generated from the sale of its output. This situation can arise in the short run when the firm is unable to adjust its fixed costs immediately.

Explanation of options:

a) Make only normal profits: This option is incorrect because the price line lies below the average cost curve, which means that the firm is not able to cover its total costs, including fixed costs, with the revenue generated from the sale of its output.

b) Incur losses: This option is correct because the price line lies below the average cost curve, which means that the firm is not able to cover its total costs, including fixed costs, with the revenue generated from the sale of its output. The losses will be equal to the difference between the total cost and the total revenue.

c) Make abnormal profits: This option is incorrect because the price line lies below the average cost curve, which means that the firm is not able to cover its total costs, including fixed costs, with the revenue generated from the sale of its output. Abnormal profits occur when the price line lies above the average cost curve.

d) Profit cannot be determined: This option is incorrect because the profit or loss can be determined by calculating the difference between the total revenue and the total cost. If the total revenue is greater than the total cost, the firm will make a profit, and if the total revenue is less than the total cost, the firm will incur a loss.

In conclusion, under perfect competition, if the price line lies below the average cost curve, the firm would incur losses because it is not able to cover its total costs, including fixed costs, with the revenue generated from the sale of its output.

Because average cost curve show the expenditure incurred in output and in this case the price of output is below to the average cost it mean firm unable to meet the amount of average cost of output so obviously firm incur in losses