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 2014 › Q35
2 marks, −0.666666666666667Microeconomics › Monopolistic competition and oligopoly › Cournot competitionModerateabout 2 min

DSE 2014 Question 35: Monopolistic competition and oligopoly

Two firms produce the same commodity; quantities x1,x2x_1,x_2x1​,x2​, total X=x1+x2X=x_1+x_2X=x1​+x2​. Inverse demand is P=a−bXP=a-bXP=a−bX. Firms have constant average costs c1,c2c_1,c_2c1​,c2​. Assume b>0b>0b>0, 0<c1<c2<a0<c_1<c_2<a0<c1​<c2​<a and a+c1>2c2a+c_1>2c_2a+c1​>2c2​. If bbb decreases, then

Tap an option to check your answer.

Answer and worked solution

Checking your account…

Plain-text version

Two firms produce the same commodity; quantities x₁,x₂, total X=x₁+x₂. Inverse demand is P=a-bX. Firms have constant average costs c₁,c₂. Assume b>0, 0<c₁<c₂<a and a+c₁>2c₂. If b decreases, then (A) the price and market share of firm 1 increase (B) the price and market share of firm 1 decrease (C) the market shares are unchanged but price increases (D) neither price, nor market shares, change

Also written as: Two firms produce the same commodity; quantities x_1,x_2, total X=x_1+x_2. Inverse demand is P=a-bX. Firms have constant average costs c_1,c_2. Assume b>0, 0<c_1<c_2<a and a+c_1>2c_2. If b decreases, then

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

What this question tests

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

Firms choosing quantities simultaneously, reaction curves, and equilibrium as the number of firms or costs change.

TestStop has 31 past-paper questions on this subtopic; the nearest in year are below.

  • GATE 2021 · Q25Consider a Cournot type n -firm natural spring oligopoly where the market demand for natural spring water is…
  • GATE 2023 · Q58A duopoly faces the inverse market demand function p=120-Q, where p is the unit price (in Rs.) of the good…
Practise Monopolistic competition and oligopolyMore on Cournot 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 2014 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.