Ludwig summon the city's inhabitants. They stage a mock quarrel and conduct the rigged statutory duel as planned: Rudolph's king is beaten by Ludwig's ace, making Ludwig the Grand Duke. Rudolph's subjects berate him with scorn, and he retreats, threatening revenge. Ludwig uses his new powers to extend the Act for another hundred years, thus ensuring that neither Rudolph nor Ernest can come back to life. Julia Jellicoe appears and once again asserts that, as leading lady, she must take the leading role of the Grand Duchess. Lisa leaves in tears. Julia points out that if she and Ludwig are to rule over a Grand Ducal court, they need to be dressed more impressively than their everyday clothes will allow. Ludwig recalls that they have a complete set of brand-new costumes for Troilus and Cressida, which they can use to "upraise the dead old days of Athens in her glory." Act II In a room in the Ducal palace, the new Grand Duke, Grand Duchess and court parade in classical costumes and sing a Grecian chorus. Left alone, Ludwig and Julia fail to agree on how her role is to be played. Caroline von Krakenfeldt arrives for her wedding and is startled to find that Rudolph has been replaced by Ludwig. But once she discovers that Ludwig has beaten Rudolph in a statutory duel, she points out that he must take on Rudolph's responsibilities – including his betrothal to her. So despite being already married to Julia, Ludwig goes off with Caroline to get married, and Julia makes a dramatic exit. Ernest, though legally dead, is desperate for news and arrives to try to find out what is going on. He sees the wedding procession in the distance and assumes that Ludwig is marrying Lisa; but it cannot be so, for Lisa appears. She sees him and runs away in fright, since he is a "ghost". He then supposes that Ludwig must be marrying his Julia, but she too appears. Though affecting to be also frightened, she stays and tells him what Ludwig has done. They leave, and the wedding party returns. Caroline is enjoying the rare pleasure of drinking "when somebody else pays the bill." Yet another unexpected visitor arrives: it is a herald, who announces that the Prince and Princess of Monte Carlo are on their way. Ludwig decides to give the Prince a theatrical welcome, and tells