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      Question

      In a duopoly with identical marginal costs, how does the

      total industry output in a Stackelberg equilibrium compare to a Cournot equilibrium?
      A Stackelberg output is lower. Correct Answer Incorrect Answer
      B Cournot output is higher. Correct Answer Incorrect Answer
      C Stackelberg output is higher. Correct Answer Incorrect Answer
      D They are identical because costs are equal. Correct Answer Incorrect Answer

      Solution

      In Cournot, firms move simultaneously and are cautious. In Stackelberg, one firm (the leader) moves first and aggressively commits to a large production volume. The follower is then forced to scale back. Overall, the leader's extra aggression outweighs the follower's reduction, leading to a higher total output and a lower market price than the simultaneous Cournot case.

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