I just read an introduction to imperfect competition in my AP microeconomics textbook and one of the practice questions asked about production in imperfect competition. The answer choices were something like this:
A. More is produced than is optimal.
B. Less is produced than is optimal. (Correct answer)
C. The amount produced minimizes costs.
D. The amount produced maximizes costs.
E. The amount produced is the same as in perfect competition.
Nothing I read in the chapter said anything about it so I’m having trouble understanding why firms produce less than what is socially optimal in imperfect competition. It’s easy to see why the amount produced wouldn’t be the same as under perfect competition since firms aren’t operating in the same condition but why wouldn’t they want to minimize costs? Wouldn’t minimum costs result in the maximum profit possible?
