1.

Distinguish betweeen perfect oligopoly and imperfect oligopoly. Also explain the "interdependence between the firm" features of oligopoly

Answer» <html><body><p></p>Solution :Pure or Perfect Oligopoly: If the firms produce homogeneous products, then it is called pure or perfect oligopoly. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminium and cemicals producing industries approach pure oligopoly.Imperfect or differentiated oligopoly: If the firms produce differentiated products, then it is called differentiated or imperfect oligopoly. For example, passenger cars, <a href="https://interviewquestions.tuteehub.com/tag/cigarettes-916462" style="font-weight:bold;" target="_blank" title="Click to know more about CIGARETTES">CIGARETTES</a> or soft drinks. The goods produced by different firms have their own distinguishing characteristics, yet all of them are <a href="https://interviewquestions.tuteehub.com/tag/close-408965" style="font-weight:bold;" target="_blank" title="Click to know more about CLOSE">CLOSE</a> substitutes of each other.The "interdependence between the firms" feature of the oligopoly can be <a href="https://interviewquestions.tuteehub.com/tag/explained-455159" style="font-weight:bold;" target="_blank" title="Click to know more about EXPLAINED">EXPLAINED</a> as follows:Firms under oligopoly are interdependent. Interdependence means that actions of one firm affect the actions of other firms. A firm considers the action and reaction of the rival firms while determining its <a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> and output levels. A change in output or price by one firm evokes reaction from other firms operating in the market.For example: market for cars in India is dominated by few firms( <a href="https://interviewquestions.tuteehub.com/tag/maruti-12849" style="font-weight:bold;" target="_blank" title="Click to know more about MARUTI">MARUTI</a>, Tata, Hyundai, Ford, Honda,etc.). A change by one firm (say, Tata) in any of its vehicle( say, Indica) will induce other firms( say, Maruti, Hyundai,etc) to make changes in their respective vehicles.</body></html>


Discussion

No Comment Found

Related InterviewSolutions