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Economic Concepts of Opportunity Costs and Unemployment Benefits

1. Why do unemployment benefits give some incentive to stay unemployed?
2. Define opportunity cost and give an example from your own experience. The opportunity cost is the sum of explicit and implicit costs of using a resource in a given fashion. It is the value of the next best alternative.
3. Suppose that, in a year, an American worker can produce 100 shirts or 20 computers, while a Chinese worker can produce 100 shirts or 10 computers. If these countries were open to trade, which country would export shirts? Give a specific numerical example and show it on your graph. Which country would benefit from trade? Explain.

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1. Unemployment is often easier to handle because there are no job costs involved- no materials, clothing, gas, babysitting, or lunch to buy, which is enticing for some. Additionally, getting paid for doing nothing, except looking for work, is easy and can become a habit. People are not responsible to others, not under pressure to produce, and able to spend time with their children and family. It also limits income, but with unemployment, there is often other public assistance, making the prospect of returning to work and paying the expenses of working too expensive.

2. I have a laptop, a tablet, and a smart phone. The cost of the laptop was $600, the Tablet was $249, and the Smartphone was $199. I use my laptop for most of my online work. To keep my laptop running and in good condition ...

Solution Summary

The solution discusses economic concepts of opportunity costs and unemployment benefits.