Reference no: EM133278031

1. The world's average GDP per capita is $14,517. There are roughly 7 billion people in the world. What is the world's total GDP? About 20% of the world's populatilon produces 50% of the world's total GDP. How much GDP does the top 20% produce? Notice that we are talking of "prodcution" and not "consumption" even though in every day life we often hear about people at the top consuming more than their share. What does the P in GDP stand for, and why is it important that we are looking at P as opposed to consumption?

2. During the great leap forward millions of Chinese starved to death because not enough food was produced by farmers. Why didn't farmers grow food? In particular, was it because there wasn't enough human capital or physical capital?

3. Communists believed that their system would be much more efficient that capitalism: They thought competition between companies was wasteful. Why build three seperate headquarters for carmakers (GM, Chrysler, and Ford)? Why have three advertising budgets? Why pay three CEOs? Why not put all the factories together so that the same engineers can fix all of the problems at all of the plants? Doesn't one large firm maximize economies of scale? Given all of these good questions, why, according to Cowen and Tabarrok, was communism such an economic disaster?