Question

Distinguish between perfect oligopoly and imperfect oligopoly. Also, explain the interdependence between the firms' feature of oligopoly.

Answer 1

Perfect oligopoly	Imperfect oligopoly
If the firms produce the homogeneous the product then it is called perfect oligopoly.	If the firm produces differentiated products then it is called imperfect oligopoly.
It is rare to find this type of situation. Examples: cement, steel, aluminium and chemical producing industries	Examples: Passenger cars, cigarettes and soft drinks.

Feature 'interdependence of firms' in an oligopoly market: In a market, the price and level of the output of one firm impact the price and level of the output of rival firms. Keeping this impact in mind, a firm decides the price and output in accordance with prevailing market conditions. Hence, a high degree of interdependence exists among competing firms, especially with regard to price and quantity of output.