uppose that you have one domestic production facility that supplies both the domestic and foreign markets. Assume that the demand for your product in the domestic market is Q = 900 2P , and in the foreign market, demand is given by Q = 3000 6P . Assume that your domestic marginal cost of production is 200. All prices and costs are in real terms. If the real exchange rate is 2, what are your optimal prices and quantities sold in the two markets? 2. You are asked to evaluate the performance of two forecasting companies specializing in CHF/MXN. Below is their recent performance: Company Correct Up Forecasts Correct Down Forecasts Delta Mega Data 90 15 Prism Algorithm 40 60 while CHF/MXN went up for 120 times, and went down for 90 times. Based on the Henriksson-Merton measure, which company has a better performance? Answer Key: 1. Domestic: Q = 250, P = 325; foreign: Q = 1200, P = 300 2. Delta Mega Data: 0.92; Prism Algorithm: 1.00