Economic Concepts of Opportunity Costs and Unemployment Benefits
1. Why do unemployment benefits give some incentive to stay unemployed?
2. Describe 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.