Question

Suppose that Lebanon has placed tariffs on its imports and exports. The import tariff is 13%, and the export tariff is 8%. If Lebanon has a balance of trade of (equivalent US dollars) $5,510,000 and received tariff revenue of $4,019,200, what are its imports and exports worth?
a.
$30,916,923 in imports, $50,240,000 in exports
b.
$17,040,000 in imports, $22,550,000 in exports
c.
$6,226,300 in imports, $5,950,800 in exports
d.
$4,793,700 in imports, $5,069,200 in exports

Answer 1

Let imports = M and exports = X.

Equations:
1) X − M = 5,510,000
2) 0.13M + 0.08X = 4,019,200

From (1): X = M + 5,510,000. Substitute into (2):
0.13M + 0.08(M + 5,510,000) = 4,019,200
0.21M + 440,800 = 4,019,200
0.21M = 3,578,400 → M = 17,040,000

Then X = 17,040,000 + 5,510,000 = 22,550,000.

Answer: b.