Question

Distinguish between perfect competition and oligopoly.

Answer 1

Perfect competition is an abstract concept that occurs in economics textbooks, but not in the real world. Imperfect competition, in which a competitive market does not meet the above conditions, is very common. Examples of imperfect competition include oligopoly, monopolistic competition, monopsony and oligopsony.

In an oligopoly, there are many buyers for a product or service. but only a few sellers. The cable television industry in most areas of the United States is a prototypical oligopoly. While an oligopolistic market is competitive —the few active firms within an industry compete with one another — it falls well short of perfect competition in several key areas. The firms involved usually sell similar products, but they are not identical. Because of the small number of firms, a singular firm has the power to influence market prices; in fact, collusion, an underhanded tactic in which competing firms join forces to manipulate prices, has historically been rampant in oligopolies. By its very nature, an oligopoly provides a large market share to each firm. Perfect knowledge does not exist, and the barriers to entry are typically high, ensuring the number of players remains small.

Answer 2

perfect competition;
-has large amount of small firms which acts independently rather Co -coordinating decision centrally
-sellers are price takers due to huge competition
- homogeneous products

oligopoly
-has very few sellers
- dominated by large firms
-deals with both homogeneous and differentiated products.

hope it helps you