Skip to content
We use only essential cookies to keep you signed in and remember your preferences. See our Cookie Policy.
TestStop
MocksPracticeResourcesIndiaBlogPricing
Sign in
Questions › DSE › DSE 2006 › Q41
2 marksMicroeconomics › Monopolistic competition and oligopoly › Stackelberg and sequential competitionHardabout 3 min

DSE 2006 Question 41: Monopolistic competition and oligopoly

For the market with inverse demand p=1−(x1+x2)p=1-(x_1+x_2)p=1−(x1​+x2​), C1(x1)=x1/2C_1(x_1)=x_1/2C1​(x1​)=x1​/2 and C2(x2)=x2/3C_2(x_2)=x_2/3C2​(x2​)=x2​/3: now suppose the situation changes so that Firm 111 chooses x1x_1x1​ first and Firm 222 chooses x2x_2x2​ after observing Firm 111's choice. Relative to the Cournot situation, in this new situation,

Tap an option to check your answer.

Answer and worked solution

Checking your account…

Plain-text version

For the market with inverse demand p=1-(x₁+x₂), C₁(x₁)=x₁/2 and C₂(x₂)=x₂/3: now suppose the situation changes so that Firm 1 chooses x₁ first and Firm 2 chooses x₂ after observing Firm 1 's choice. Relative to the Cournot situation, in this new situation, (A) x₁ and x₂ decrease (B) x₁ decreases and x₂ increases (C) x₁ increases and x₂ decreases (D) x₁ and x₂ increase

Also written as: For the market with inverse demand p=1-(x_1+x_2), C_1(x_1)=x_1/2 and C_2(x_2)=x_2/3: now suppose the situation changes so that Firm 1 chooses x_1 first and Firm 2 chooses x_2 after observing Firm 1 's choice. Relative to the Cournot situation, in this new situation,

Monopolistic competition and oligopoly has come up 104 times in 7 exams since 2004.

What this question tests

This question is on Stackelberg and sequential competition, part of Monopolistic competition and oligopoly in Microeconomics.

A leader moving first and a follower reacting, in quantities or prices.

TestStop has 12 past-paper questions on this subtopic.

Practise Monopolistic competition and oligopolyMore on Stackelberg and sequential competition

Similar questions from other papers

  • CUET-PG 2026 · Q8The following two characteristics define a particular type of market: A. Close substitute products are sold by firms; B. Free entry and exit of firms. Select the…
  • GATE 2026 · Q45Two companies, Company 1 and Company 2, are playing a simultaneous-move game. They are selling competing devices, whose quantity demanded are given by x₁ and x₂, and…
  • IIT JAM 2026 · Q56A duopoly market has demand P=120-0.6Q with Q=Q₁+Q₂, and cost functions C₁=6Q₁ and C₂=0.5Q₂², where P is unit price, Cᵢ is the cost function and Qᵢ is the output of…
  • UGC-NET 2026 · Q2Which of the following is not an assumption of Monopolistic Competition?
  • CUET-PG 2025 · Q59The Kinked demand curve model can explain (A) the level at which price will be set by firms to maximize profits. (B) the level of price at which the kink will occur as…

Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.