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Questions › DSE › DSE 2010 › Q59
2 marksMicroeconomics › Monopolistic competition and oligopoly › Stackelberg and sequential competitionHardabout 4 min

DSE 2010 Question 59: Monopolistic competition and oligopoly

Consider a Stackelberg duopoly with firm 1 as leader and firm 2 as follower. If (q1,q2)(q_{1},q_{2})(q1​,q2​) is the Stackelberg equilibrium, then

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Consider a Stackelberg duopoly with firm 1 as leader and firm 2 as follower. If (q₁,q₂) is the Stackelberg equilibrium, then (A) firm 1's optimal isoprofit curve and firm 2's reaction curve intersect at (q₁,q₂) and are tangential at (q₁,q₂) (B) firm 2's optimal isoprofit curve and firm 1's reaction curve intersect at (q₁,q₂) and are tangential at (q₁,q₂) (C) isoprofit curves of the two firms intersect at (q₁,q₂) and are tangential at (q₁,q₂) (D) reaction curves of the two firms intersect at (q₁,q₂)

Also written as: Consider a Stackelberg duopoly with firm 1 as leader and firm 2 as follower. If (q_1,q_2) is the Stackelberg equilibrium, then

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.

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Question from the DSE 2010 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.