Determining the real exchange rate


Suppose you are a monopolist who faces a domestic demand curve given by q= 1,000-2p. Your domestic cost of production involves domestic costs per unit of 300 and a foreign cost per unit produced of 150. If the real exchange rate is 1.1, what would b the price you would charge and the quantity you would sell? How do these variables changes when the real exchange rate increase by 10%.

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Finance Basics: Determining the real exchange rate
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