Microeconomics 7th Edition Perloff

Test Bank
Visit to download the full and correct content document:
https://testbankdeal.com/download/microeconomics-7th-edition-perloff-test-bank/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...

Microeconomics 7th Edition Perloff Solutions Manual

https://testbankdeal.com/product/microeconomics-7th-edition-
perloff-solutions-manual/

Microeconomics 8th Edition Perloff Test Bank

https://testbankdeal.com/product/microeconomics-8th-edition-
perloff-test-bank/

Microeconomics 8th Edition Perloff Solutions Manual

https://testbankdeal.com/product/microeconomics-8th-edition-
perloff-solutions-manual/

Microeconomics Australian 1st Edition Perloff Solutions

Manual

https://testbankdeal.com/product/microeconomics-australian-1st-
edition-perloff-solutions-manual/
Microeconomics Theory and Applications with Calculus
4th Edition Perloff Test Bank

https://testbankdeal.com/product/microeconomics-theory-and-
applications-with-calculus-4th-edition-perloff-test-bank/

Microeconomics Theory and Applications with Calculus

3rd Edition Perloff Test Bank

https://testbankdeal.com/product/microeconomics-theory-and-
applications-with-calculus-3rd-edition-perloff-test-bank/

Microeconomics Theory and Applications with Calculus

3rd Edition Perloff Solutions Manual

https://testbankdeal.com/product/microeconomics-theory-and-
applications-with-calculus-3rd-edition-perloff-solutions-manual/

Microeconomics Theory and Applications with Calculus

4th Edition Perloff Solutions Manual

https://testbankdeal.com/product/microeconomics-theory-and-
applications-with-calculus-4th-edition-perloff-solutions-manual/

Microeconomics 7th Edition Pindyck Test Bank

https://testbankdeal.com/product/microeconomics-7th-edition-
pindyck-test-bank/
Microeconomics, 7e (Perloff)
Chapter 10 General Equilibrium and Economic Welfare

10.1 General Equilibrium

1) General equilibrium analysis is the study of

A) how an equilibrium is determined in all markets simultaneously.
B) how an equilibrium is determined in all closely related markets.
C) the effects of a change in a market, and all spillover effects in all related markets.
D) Any of the above.
Answer: D
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

2) As opposed to general equilibrium analysis, partial equilibrium analysis looks

A) at an equilibrium and changes to it in a single, isolated market.
B) at how changes in all other markets effect a particular market.
C) at how equilibrium is determined in all markets simultaneously.
D) at either price or quantity movements.
Answer: A
Section: General Equilibrium
Question Status: Revised
AACSB: Analytic thinking

3) A general equilibrium analysis of a price change in the corn chip market would include an
investigation of the impacts in
A) the television market.
B) the coffee market.
C) the salsa market.
D) All of the above.
Answer: C
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

4) The general equilibrium analysis of a minimum wage applied to only some sectors of the economy
suggests that
A) workers in all sectors will face increased wages.
B) some workers in the covered sectors will lose their jobs and remain unemployed.
C) some workers originally employed in the covered sectors will move to the uncovered sectors, driving
down wages in the uncovered sectors.
D) all workers will be worse off.
Answer: C
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

1
Copyright © 2015 Pearson Education, Inc.
5) When comparing partial equilibrium effects to general equilibrium effects one can conclude that
A) general equilibrium effects are always larger.
B) partial equilibrium effects are always larger.
C) the effects are of equal size.
D) one cannot determine before the fact which effect is greater.
Answer: D
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

6) Reparations for slavery in the United States would

A) be consistent with the Pareto principle.
B) be inconsistent with the Pareto principle.
C) have nothing to do with the Pareto principle.
D) be unconstitutional.
Answer: B
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

7) If firms are producing efficiently, but consumers can reallocate goods amongst themselves,
A) the equilibrium is not efficient.
B) the equilibrium is efficient.
C) the consumers are behaving irrationally.
D) the firms are too greedy.
Answer: A
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

8) Assume Congress holds a hearing on the impact of gasoline prices on the price of corn. Most likely, this
hearing will be
A) a partial equilibrium analysis.
B) a general equilibrium analysis.
C) about consumer rather than producer surplus.
D) an analysis of efficiency.
Answer: A
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

2
Copyright © 2015 Pearson Education, Inc.
9) If two or more markets are closely related,
A) a partial equilibrium analysis will tend to overstate the price impact of a supply shock.
B) a partial equilibrium analysis will tend to accurately predict the price impact of a supply shock.
C) a partial equilibrium analysis will tend to understate the price impact of a supply shock.
D) they should be analyzed concurrently but using partial equilibrium analysis alone.
Answer: C
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

10) The saying "what's that got to do with the price of tea?" reflects
A) two markets where general equilibrium analysis would be most useful.
B) two markets where general equilibrium analysis likely won't be very useful.
C) two markets where the products are clearly closely related.
D) two markets where firms are incredibly greedy.
Answer: B
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

11) There are two closely related crops, X and Y, with the following demand functions
QX = 180 - 2PX + PY and QY = 150 + PX - PY where QX is the quantity of X, PX is the price of X, QY is the
quantity of Y, and PY is the price of Y. These two crops are grown in two widely separated countries so
there is no interrelationship between the supply curves. The short-run perfectly inelastic supply for X is
150 while the short-run perfectly inelastic supply for Y is 100. In equilibrium, the prices are
A) PX = 80, PY = 130
B) PX = 40, PY = 65
C) PX = 60, PY = 120
D) PX = 30, PY = 80
Answer: A
Section: General Equilibrium
Question Status: New
AACSB: Analytic thinking

3
Copyright © 2015 Pearson Education, Inc.
12) There are two closely related crops, X and Y, with the following demand functions Q X = 180 - 2PX +
PY and QY = 150 + PX - PY where QX is the quantity of X, PX is the price of X, QY is the quantity of Y,
and PY is the price of Y. These two crops are grown in two widely separated countries so there is no
interrelationship between the supply curves. The short-run perfectly inelastic supply for X is 200 while
the short-run perfectly inelastic supply for Y is 100. In equilibrium, the prices are
A) PX = 30, PY = 80
B) PX = 40, PY = 60
C) PX = 60, PY = 120
D) PX = 80, PY = 130
Answer: A
Section: General Equilibrium
Question Status: New
AACSB: Analytic thinking

13) Employers in a city must pay a specific tax of $t per hour worked by their employees while employers
in the suburbs of the city do not have an employment tax. What does a general equilibrium approach
predict regarding the wages and employment of both the city and suburban workers if the city decides to
substantially reduce their employment tax rate?
A) Wages will increase in the city, but not in the suburbs, and employment will increase in both.
B) Wages will increase in both the city and the suburbs, but employment will fall in both.
C) Wages will increase in both the city and suburbs, employment will increase in the city, but decrease in
the suburbs.
D) Wages will increase in both the city and the suburbs, employment will decrease in the city, but
increase in the suburbs.
Answer: C
Section: General Equilibrium
Question Status: New
AACSB: Analytic thinking

For the following, please answer "True" or "False" and explain why.

14) The effects of a price change are always understated by a partial-equilibrium analysis when compared
to a general-equilibrium analysis.
Answer: False. If the price change affects other markets, the partial-equilibrium analysis will be different
than the general-equilibrium. However, the results may be smaller or larger under either analysis.
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

4
Copyright © 2015 Pearson Education, Inc.
15) Employing a general equilibrium approach, describe the effect of a new law that prohibits steel
imports.
Answer: The initial effect is that the supply curve for steel shifts leftward. This raises the price of steel.
The largest users of steel are the automobile industry, the construction industry, and the appliance
industry. The increased cost of inputs will raise the price of the goods produced by these industries.
Given time, these industries will look to substitute plastic or aluminum in place of steel, raising the prices
of these materials.
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

16) Suppose that the minimum wage covers all sectors of the economy; however, for unionized laborers,
the minimum wage is ineffective. That is, the union wage is already above the minimum wage. Analyze
the impact of an increase in the minimum wage on both the unionized and non-unionized labor markets.
(Assume that the higher minimum wage is still ineffective in the unionized sector and that union and
nonunion labor are substitutable.)
Answer:

See the above figure. The higher minimum wage from min1 to min2 reduces the quantity demanded of
nonunion labor from L1 to L2. This causes a rightward shift of the demand curve for union labor from
D1 to D2. The equilibrium union wage rises from W1 to W2. This explains why unions typically support
increases in the minimum wage even though it does not directly affect their members.
Section: General Equilibrium
Question Status: Old
AACSB: Analytic thinking

5
Copyright © 2015 Pearson Education, Inc.
10.2 Trading Between Two People

1) Joe and Rita each have some cookies and milk. Joe is willing to trade 2 cookies for an additional ounce
of milk. Rita is willing to trade 4 cookies for an additional ounce of milk. If trading is possible, which of
the following is most likely to occur?
A) Joe will give some milk to Rita in exchange for cookies.
B) Rita will give some milk to Joe in exchange for cookies.
C) No trade will take place since they both prefer to have more milk and fewer cookies.
D) There is not enough information to make any predictions.
Answer: A
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

2) Joe and Rita each have some milk and cookies (Milk on the horizontal axis). Joe's MRS of cookies for
milk is 2. Rita's MRS of cookies for milk is 4. Which of the following statements is TRUE?
A) No gains from trade are possible.
B) Both Rita and Joe can be made better off if Rita gives Joe some cookies in exchange for milk.
C) Rita and Joe are on the contract curve.
D) Both Rita and Joe can be made better off if Joe gives Rita some cookies in exchange for milk.
Answer: B
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

3) Gains from trade can only occur when

A) marginal rates of substitutions differ across people.
B) marginal rates of substitution are equal across people.
C) indifference curves are convex.
D) people find themselves on the contract curve.
Answer: A
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

4) Moving away from the contract curve will

A) harm both parties.
B) harm only one of the parties.
C) harm at least one of the parties.
D) harm neither of the parties.
Answer: C
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

6
Copyright © 2015 Pearson Education, Inc.
5) If only two people are trading their endowments and no production is possible, then the equilibrium
they reach will
A) be on their contract curve.
B) result in unequal marginal rates of substitution for the two people.
C) result in one person being worse off than with his or her endowment.
D) All of the above.
Answer: A
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

6) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Part of the contract
curve can be found by connecting points
A) a and b.
B) a and c.
C) b and d.
D) c and d.
Answer: D
Section: Trading between Two People
Question Status: Revised
AACSB: Analytic thinking

7
Copyright © 2015 Pearson Education, Inc.
7) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Points a and b
A) are most likely to reflect the final allocations after trading.
B) are least likely to reflect the final allocations after trading.
C) are equally likely to reflect the final allocations after trading than other points on the contract curve.
D) are definitely not the final allocations after trading.
Answer: D
Section: Trading between Two People
Question Status: Revised
AACSB: Analytic thinking

8) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. If the endowment is at
point a, and trade is possible, which of the following points are possible equilibria?
A) a and b
B) a and c
C) b and d
D) c and d
Answer: D
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

9) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Considering only the
labeled points, point c is a possible equilibrium
A) only if it is the endowment.
B) only if point a is the endowment.
C) if either point a or b is the endowment.
D) only if point d is the endowment.
Answer: C
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

10) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. If the endowment is at
point a, and Al has no ability to bargain, the final allocation will be at point
A) a.
B) b.
C) c.
D) d.
Answer: C
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

8
Copyright © 2015 Pearson Education, Inc.
11) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Point a is NOT Pareto
efficient because
A) Al's MRS exceeds Bruce's MRS.
B) the point is not near the center of the box.
C) Al's indifference curve is not far enough away from the origin.
D) All of the above.
Answer: A
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

12) The above figure depicts the Edgeworth box for two individuals, Al and Bruce. Point c is Pareto
efficient because
A) the MRS's are equal.
B) the indifference curves are tangent.
C) no mutual gains from trade exist.
D) All of the above.
Answer: D
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

13) Only individuals A and B live on a desert island where no production is possible. A is endowed with
12 units of good X and 18 units of good Y. B is endowed with 6 units of good X and 42 units of good Y. In
the Edgeworth box, good X is measured on the horizontal axis. Individual A's utility function is
UA = 3XY so her MUX = 3Y and her MUY = 3X. Individual B's utility function is UB = 10 so his

and his MUY = 5 . Which of the following allocations are on the contract curve?

A) (XA = 12, YA = 24), (XB = 6, YB = 36)

B) (XA = 10, YA = 28), (XB = 8, YB = 32)
C) (XA = 9, YA = 30), (XB = 9, YB = 30)
D) None of the above.
Answer: C
Section: Trading between Two People
Question Status: New
AACSB: Analytic thinking

9
Copyright © 2015 Pearson Education, Inc.
14) Only individuals A and B live on a desert island where no production is possible. A is endowed with
15 units of good X and 17 units of good Y. B is endowed with 13 units of good X and 23 units of good Y.
In the Edgeworth box, good X is measured on the horizontal axis. Individual A's utility function is
UA = 3XY so her MUX = 3Y and her MUY = 3X. Individual B's utility function is UB = 10 so his

and his MUY = 5 . Which of the following allocations are on the contract curve?

A) (XA = 14, YA = 20), (XB = 14, YB = 20)

B) (XA = 15, YA = 17), (XB = 13, YB = 23)
C) (XA = 18, YA = 22), (XB = 10, YB = 18)
D) None of the above.
Answer: A
Section: Trading between Two People
Question Status: New
AACSB: Analytic thinking

15) When considering trade of two goods between two people, if one person has all the endowment of
both goods, this allocation
A) is never on a contract curve.
B) will result in trade so each person has all of one good.
C) will result in trade to a equal division of goods between the two people.
D) is Pareto efficient.
Answer: D
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

16) When two people are on the contract curve, the allocation of goods
A) cannot be improved.
B) is pareto efficient.
C) is such that neither individual can be made better off without making the other worse off.
D) All of the above.
Answer: D
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

17) Gains from trade will be possible as long as

A) people have different endowments.
B) people place different values on some goods.
C) marginal rates of substitution are equal across individuals.
D) excess supply equals excess demand.
Answer: B
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

10
Copyright © 2015 Pearson Education, Inc.
18) Gains from trade will be possible as long as
A) levels of utility differ.
B) utility functions differ.
C) marginal rates of substitution differ.
D) endowments differ.
Answer: C
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

19) The term "born with a silver spoon in his mouth" mistakenly implies
A) only monetary endowments allow one to trade with others.
B) only the wealthy are strong negotiators in trade.
C) endowments are physical.
D) endowments differ.
Answer: C
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

For the following, please answer "True" or "False" and explain why.

20) Any point on the contract curve is Pareto efficient regardless of the initial endowment.
Answer: True. Efficiency requires that no gains from trade are possible. This is true along the contract
curve.
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

21) If two grade-school children willingly trade their lunches with one another, we can conclude that at
least one of them preferred the other's lunch to his own.
Answer: True. Either one or both preferred the other's. If only one preferred the other's, then the other
must have been indifferent between the two lunches.
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

22) When two people trade their initial endowments to a point on the contract curve, only the level of the
endowments will determine the new allocation.
Answer: False. The respective bargaining abilities will also play a role in determining the final allocation.
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

11
Copyright © 2015 Pearson Education, Inc.
23) Explain why having different marginal rates of substitution is necessary for trade to occur.
Answer: The marginal rate of substitution is the rate at which a person is willing to trade one good for
another. If these rates are not equal for all people, trade can occur. With different marginal rates of
substitution, at least one person gains by trading. When the marginal rates of substitution are the same
for everyone, everyone is willing to trade goods at the same rate, so no one can gain by trading.
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

24) Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no
clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F ∗ C.
Derive the contract curve.
Answer: Let F and C denote the farmer's final allotment of food and clothing. Setting MRS's equal yields
F/C = (10 – F)/(20 – C) or F/C = 1/2. The contract curve is a ray from the origin with a slope of 1/2
(assuming food is on the vertical axis).
Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

25) Robinson starts out with 10 lobsters and 5 coconuts. Friday starts out with 10 lobsters and 15
coconuts. After trading, Robinson ends up with 8 lobsters and 10 coconuts. Robinson feels neither better
nor worse off than when he started but cannot get Friday to agree to any more trades. Friday feels better
off than when he started. Draw the Edgeworth box consistent with this story.
Answer:

See the above figure.

Section: Trading between Two People
Question Status: Old
AACSB: Analytic thinking

12
Copyright © 2015 Pearson Education, Inc.
10.3 Competitive Exchange

1) The First Theorem of Welfare Economics can be expressed as

A) the competitive equilibrium results only when no transactions costs exist.
B) the competitive equilibrium does not involve reallocation of endowments.
C) any efficient allocations can be achieved by competition.
D) the competitive equilibrium is efficient.
Answer: D
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

2) An initial allocation of goods is called a(n)

A) endowment.
B) inheritance.
C) pareto set.
D) general equilibrium goods set.
Answer: A
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

3) Suppose two people start with an initial endowment and trade until they obtain a Pareto-efficient
allocation with the corresponding price line. What happens when more people who have the same tastes
and endowments as the original two traders are included in the Edgeworth box analysis?
A) The price line does not change.
B) The price line becomes flatter.
C) The price line becomes steeper.
D) The price line shifts up or down depending upon how many of each type of trader is included in the
analysis.
Answer: A
Section: Competitive Exchange
Question Status: New
AACSB: Analytic thinking

4) In a competitive marketplace, prices adjust until

A) MRS's are equal to zero.
B) excess supply equals excess demand equals zero in all markets.
C) each consumer has maximized utility subject to his budget constraint.
D) all firms earn zero profit.
Answer: B
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

13
Copyright © 2015 Pearson Education, Inc.
5) A competitive equilibrium is Pareto-efficient because at the competitive equilibrium,
A) prices have been allowed to adjust.
B) there are no further gains from trade.
C) the final outcome is different from the original inefficient endowment.
D) all members of society can be made better off.
Answer: B
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

6) The fact that at the competitive equilibrium nobody can be made better off without making someone
else worse off implies that
A) the equilibrium is Pareto-efficient.
B) the equilibrium is not Pareto-efficient.
C) the prices need to adjust further.
D) further gains from trade are possible.
Answer: A
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

7) Any competitive equilibrium is Pareto-efficient because, with a competitive equilibrium,

A) the marginal rates of substitution are equal for all consumers.
B) the price line is the contract curve.
C) mutual gains from trade exist.
D) the slope of the price line equals the ratio of the MRS for all consumers.
Answer: A
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

8) The fact that any Pareto-efficient equilibrium can be achieved through competition by adjusting
endowments is called
A) the Second Welfare Theorem.
B) the First Welfare Theorem.
C) the Third Welfare Theorem.
D) That is not possible.
Answer: A
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

14
Copyright © 2015 Pearson Education, Inc.
9) For a given set of prices, two consumers choose bundles that are off the contract curve. In a competitive
market,
A) prices will adjust until the consumers choose bundles that are on the contract curve.
B) the indifference curves will shift back to the contract curve.
C) the contract curve will shift to connect these bundles.
D) no adjustments need to be made.
Answer: A
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

10) In a competitive market, prices adjust until all consumers find themselves
A) maximizing utility.
B) on the contract curve.
C) happy with their original endowment.
D) with many opportunities to gain from additional exchange.
Answer: B
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

11) The so-called "death tax" might

A) aim to alter endowments so as to attain an inefficient outcome.
B) aim to alter endowments consistent with the First Theorem of Welfare Economics.
C) aim to alter endowments consistent with the Second Theorem of Welfare Economics.
D) aim to alter prices consistent with the First Theorem of Welfare Economics.
Answer: C
Section: Competitive Exchange
Question Status: Revised
AACSB: Analytic thinking

12) A government policy of providing free public K-12 education is most consistent with
A) Pareto-efficiency.
B) the First Theorem of Welfare Economics.
C) the Second Theorem of Welfare Economics.
D) the contract curve.
Answer: C
Section: Competitive Exchange
Question Status: New
AACSB: Analytic thinking

15
Copyright © 2015 Pearson Education, Inc.
13) True or false? The Edgeworth box version of inter-personal trade requires the individuals to be in
close proximity of one another.
A) True, that way they can see each other's endowments and prices.
B) False, begin in close proximity is not required for mutually beneficial trade to occur in the Edgeworth
box.
C) True, the Edgeworth box only works when there folks see "eye-to-eye."
D) False, although prices are only valid if they are communicated in person.
Answer: B
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

For the following, please answer "True" or "False" and explain why.

14) A competitive equilibrium is not Pareto efficient if some members of society are unable to afford a
necessary good.
Answer: False. The competitive equilibrium described is efficient since all consumers set MRS equal to
the price ratio. The problem with the described equilibrium is one of distributive justice not efficiency.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

15) Assume a government likes a particular equilibrium along the contract curve. It can achieve that
equilibrium through competition and income redistribution.
Answer: True. This statement is called the Second Welfare Theorem.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

16) Explain why Robin Hood's practice of stealing from the rich to give to the poor is never Pareto
efficient.
Answer: When Robin steals from the rich, those people are made worse off. This cannot be Pareto
efficient.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

17) Explain the logic behind the First Theorem of Welfare Economics.
Answer: A competitive market allows all the voluntary trades desired by people who face the same
price. No additional voluntary trades can occur so there is no way to make someone better off. Thus, a
competitive equilibrium is efficient.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

16
Copyright © 2015 Pearson Education, Inc.
18) Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no
clothing. The tailor has 20 units of clothing but no food. Suppose each has the utility function U = F ∗ C.
The price of clothing is always $1. If the price of food is $3, does a competitive equilibrium exist? If not,
what will happen to the price of food?
Answer:
If the price of food is $3, the farmer's initial wealth is $30. His budget line is 30 = 3F + C. His budget line is
tangent to an indifference curve when C/F = 3. Substituting yields 30 = 6F or F = 5 and C = 15. The tailor's
budget line is 20 = 3F + C. His budget line is tangent to an indifference curve when C/F = 3. Substituting
yields 20 = 6F or F = 3.33 and C = 10. In total 8.33 units of food and 25 units of clothing are demanded.
There is excess demand for clothing and excess supply of food. The price of food will fall. When the price
of food is $2, both markets clear.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

19) The above figure depicts the Edgeworth box for two consumers, Al and Bruce. Explain why point "a"
cannot be a competitive equilibrium.
Answer: Point "a" cannot be a competitive equilibrium because at point "a", Al and Bruce each have a
different marginal rate of substitution. Since they both face the same prices in a competitive market, at
least one of them is not in equilibrium.
Section: Competitive Exchange
Question Status: Old
AACSB: Analytic thinking

17
Copyright © 2015 Pearson Education, Inc.
10.4 Production and Trading

1) If pizza is measured on the horizontal axis and pretzels are measured on the vertical axis, the slope of
the production possibility frontier at a given combination reflects
A) the total cost of producing that combination.
B) the total cost of producing that quantity of pizza in terms of pretzels.
C) the cost of making the last pizza in terms of pretzels.
D) the cost of making the last pretzel in terms of pizza.
Answer: C
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

2) The ability to produce a good at a lower opportunity cost than someone else is called
A) competitive production.
B) comparative advantage.
C) selective advantage.
D) absolute advantage.
Answer: B
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

18
Copyright © 2015 Pearson Education, Inc.
3) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier
A) will kink away from the origin at 20 units of food.
B) will kink toward the origin at 20 units of food.
C) will kink toward the origin at 10 units of food.
D) will kink away from the origin at 10 units of food.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

4) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. The United States has a comparative advantage in producing
A) food.
B) clothing.
C) food and clothing.
D) neither good.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

19
Copyright © 2015 Pearson Education, Inc.
5) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier
A) will have a slope of -3/4 over the entire frontier.
B) will have a slope of -2 when less than 20 units of food are produced.
C) will have a slope of -1 when less than 20 units of food are produced.
D) will have a slope of -1/2 when less than 20 units of food are produced.
Answer: D
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

6) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. Assuming free trade between
these two countries, Canada will produce food
A) as long as any positive amount of food is demanded.
B) as long as more than 10 units of food are demanded.
C) as long as people are willing to give up at least 1 unit of clothing to get a unit of food.
D) as long as people are willing to give up more than 1/2 unit of clothing to get a unit of food.
Answer: C
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

7) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. If production occurs at the kink
on the joint production possibility frontier,
A) the U.S. will specialize in food and Canada will specialize in clothing.
B) the U.S. will specialize in clothing and Canada will specialize in food.
C) each country will devote half of its resources to each industry.
D) joint output is minimized.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

20
Copyright © 2015 Pearson Education, Inc.
8) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. Suppose each country is in
competitive equilibrium prior to free trade being allowed. Once free trade is allowed, the price of food
will be
A) two times the price of clothing.
B) equal to the price of clothing.
C) one-half the price of clothing.
D) somewhere between one-half the price of clothing and the price of clothing, depending upon the
relative bargaining power of the two countries.
Answer: D
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

9) Suppose the production possibilities for two countries, producing either food or clothing, are shown in
the above figure. They can each produce any linear combination as well. Once free trade is allowed,
Canada will produce
A) no clothing.
B) 10 units of clothing.
C) 20 units of clothing.
D) 5 units of clothing.
Answer: B
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

10) Suppose the production possibilities for two countries, producing either food or clothing, are shown
in the above figure. They can each produce any linear combination as well. Assuming that consumers
place equal value on both of these goods and that free trade between these two countries is possible,
gains from trade
A) are not possible.
B) exist because food is more expensive to produce in Canada than in the U.S.
C) exist because food is more expensive to produce in the U.S. than in Canada.
D) do not exist because the consumers in each country have set their marginal rate of substitution equal
to their country's marginal rate of transformation.
Answer: B
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

21
Copyright © 2015 Pearson Education, Inc.
11) Suppose the production possibilities for two countries, producing either food or clothing, are shown
in the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier has a horizontal intercept of
A) 10.
B) 20.
C) 30.
D) 50.
Answer: C
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

12) Suppose the production possibilities for two countries, producing either food or clothing, are shown
in the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier has a vertical intercept of
A) 10.
B) 20.
C) 30.
D) 50.
Answer: B
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

13) Suppose the production possibilities for two countries, producing either food or clothing, are shown
in the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier will have a slope of -1
A) only when 20-30 units of food are produced.
B) only when 10-20 units of food are produced.
C) only when 10-20 units of clothing are produced.
D) throughout the entire PPF.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

14) Suppose the production possibilities for two countries, producing either food or clothing, are shown
in the above figure. They can each produce any linear combination as well. Measuring food on the
horizontal axis, the joint production possibility frontier has a kink because
A) each country has a constant marginal rate of transformation that differs from the other country.
B) each country has a marginal rate of transformation that varies with the product mix.
C) all production possibility frontiers have kinks.
D) the two countries have the same marginal rate of transformation.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

22
Copyright © 2015 Pearson Education, Inc.
15) Every point on the joint production possibilities frontier represents
A) an initial endowment.
B) inefficient production.
C) the marginal rate of substitution of goods for each producer.
D) at least one producer specializing in production.
Answer: D
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

16) At a perfectly competitive equilibrium with production and trade, the slope of the production
possibility curve will be
A) equal to the slope of the price line faced by the consumers.
B) steeper than the slope of the price line faced by consumers.
C) flatter than the slope of the price line faced by consumers.
D) either steeper or flatter than the price line faced by the consumers, depending upon the relative
preferences of the consumers.
Answer: A
Section: Production and Trading
Question Status: New
AACSB: Analytic thinking

17) As more producers with differing marginal rates of transformation are added, the joint production
possibility curve becomes
A) steeper.
B) flatter.
C) more convex to the origin.
D) smoother.
Answer: D
Section: Production and Trading
Question Status: New
AACSB: Analytic thinking

18) In a perfectly competitive equilibrium with production and trade, which of the following results
occur(s)?
A) Pareto-efficiency is obtained.
B) The First Welfare Theorem is satisfied.
C) There is efficiency in production.
D) All of the above.
Answer: D
Section: Production and Trading
Question Status: New
AACSB: Analytic thinking

23
Copyright © 2015 Pearson Education, Inc.
19) Competition results in the efficient product mix because
A) producers are setting MRT equal to minus the price ratio while consumers are setting MRS equal to
minus the price ratio ensuring that MRT will equal MRS.
B) consumers are on the contract curve.
C) the slope of the production possibility frontier will equal the slope of the contract curve.
D) the distribution of the final output is Pareto efficient.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

20) By saying that MRS = MRT, an economist means that

A) for all goods, the value that society places on the last unit produced equals the cost of making that
unit.
B) for all goods, the value that a consumer places on the last unit consumed equals the value that all
consumers would place on that unit.
C) society is able to produce more output of one good without reducing the output of any other good.
D) no other output mix is technically feasible.
Answer: A
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

21) Economic growth can be depicted as

A) a change in the country's MRS.
B) a change in the country's MRT.
C) a shift of the country's production possibilities frontier to the right.
D) a shift of the country's production possibilities frontier to the left.
Answer: C
Section: Production and Trading
Question Status: Revised
AACSB: Analytic thinking

22) Economic growth can be depicted as a

A) shift in the contract curve.
B) a change in the dimensions of the Edgeworth box.
C) a change in the preference curves of individuals.
D) a change in the number of people in the Edgeworth box.
Answer: B
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

24
Copyright © 2015 Pearson Education, Inc.
23) Economic growth can be obtained
A) by government legislation.
B) by a change in the level of inputs or an improvement in technology.
C) only through a change in the level of inputs, hence the desire for conquest throughout the history of
the world.
D) only through a change in technology, which explains the explosive growth of the United States.
Answer: B
Section: Production and Trading
Question Status: Revised
AACSB: Analytic thinking

For the following, please answer "True" or "False" and explain why.

24) If MRS's are equal across all consumers, then the efficient product mix has been achieved.
Answer: False. Consumption efficiency has been achieved for the given product mix, but the given
product mix is efficient only if MRT equals the MRS for all pairs of goods.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

25) At the competitive equilibrium quantity supplied equals quantity demanded in all markets.
Answer: True. When the MRS = MRT = ratio of prices, the optimal product mix is produced efficiently
and firms sell at marginal cost.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

26) Explain how it is possible for one of two people in a two-good economy to have an absolute
advantage in producing both goods, but trade can still benefit both people.
Answer: One person, when she spends all of her time producing one good or the other, can produce
more of either good than the other person. This person has an absolute advantage in producing both
goods. However, gains from trade exist when the opportunity costs associated with each good are
different for both people. If the costs of producing one good in terms of the forgone production of the
other good differ for the two people, then they can gain from trade.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

27) Suppose a society's PPF for food (F) and clothing (C) can be written as 25 = F 2 + C2. If all consumers
have the same endowment and the same utility function Ui = Fi ∗ Ci, what is the efficient product mix of
food and clothing?
Answer: The marginal rate of substitution of food for clothing (dF/dC) equals F/C. The marginal rate of
transformation of food for clothing (dF/dC) equals C/F. The efficient product mix occurs when
or C = F. Given the PPF, food and clothing will both equal sqrt(12.5).
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

25
Copyright © 2015 Pearson Education, Inc.
28) Can consumption efficiency be achieved even if the efficient product mix is not achieved?
Answer: Efficiency in consumption implies that all consumers have the same MRS. This can be achieved
with any product mix. Thus, consumers can be as well off as possible for any given product mix. If the
product mix is inefficient, consumers can still make the best of it even though a different product mix
could make them even better off.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

29) How does competition ensure that the efficient product mix is attained?
Answer: In a competitive market, producers choose an output level where marginal cost equals price.
Thus, Px/Py = MCx/MCy. Each consumer maximizes her own utility subject to the given prices by setting
MUx/MUy = px/py. Even though each is acting independently and in her own interest, the final outcome
is that px/py = MRS = MRT, which is the condition for efficient product mix.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

30) The above figure shows a production possibility frontier for a society with two members, Al and
Bruce. If point "a" is the efficient product mix, draw a possible Edgeworth box and indifference curves.
Answer: The Edgeworth box has 0,0 as the southwest corner and point "a" as the northeast corner. The
indifference curves must be tangent at a point where their slopes equal the slope of the PPF at point "a".
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

26
Copyright © 2015 Pearson Education, Inc.
31) Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any linear combination) and
Canada can produce 6 units of food and 3 units of clothing (or any linear combination). What type of
trade will occur between these two countries? Explain.
Answer: In both countries, 2 units of food must be sacrificed to produce a unit of clothing. Since each
country has the same MRT, there are no gains from trade to be made.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

32) Suppose the U.S. can produce 10 units of food and 5 units of clothing (or any such linear combination)
and Canada can produce 6 units of food and 4 units of clothing (or any such linear combination). If trade
occurs between these two countries, which should produce more food and which more clothing?
Answer: The U.S. has a comparative advantage in food, 5/10 < 4/6. Canada has a comparative advantage
in clothing, 5/10 < 4/6. The U.S. should produce food and Canada should produce clothing.
Section: Production and Trading
Question Status: Old
AACSB: Analytic thinking

10.5 Efficiency and Equity

1) Any policy change that results in a Pareto-superior allocation

A) will increase welfare under certain conditions.
B) must increase welfare.
C) will leave welfare unchanged.
D) will have an unpredictable effect on welfare.
Answer: B
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

2) A cake is to be shared by two people. Both desire the largest piece possible. One of the two will cut the
cake. Under which of the following situations will the cutter adopt a Rawlsian social welfare function?
A) The person cutting the cake chooses the first piece.
B) The person not cutting the cake chooses the first piece.
C) The two individuals will bid for the right to cut the cake and choose first.
D) The two individuals will toss a coin for the right to cut the cake and choose first.
Answer: B
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

27
Copyright © 2015 Pearson Education, Inc.
3) Suppose in a democratic society, all voters prefer choice G over choice B; however, when the two
choices are presented along with a third choice, R, B wins the election. This violates the assumption of
A) transitivity.
B) non-dictatorship.
C) independence of irrelevant alternatives.
D) completeness.
Answer: C
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

4) No clearly defined socially preferred outcome may result when majority voting on outcomes because
A) often voters don't understand the outcomes.
B) voting may violate the independence of irrelevant alternatives.
C) voting may lead to incomplete preferences.
D) voting may lead to non-transitive preference.
Answer: D
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

5) If everyone's utility is given equal weight and a change in resource allocation results in one person's
gain exceeding another person's loss, we can say that the new allocation
A) is Pareto superior to the original one.
B) increases social welfare.
C) decreases social welfare.
D) is efficient.
Answer: B
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

6) If a society only cares about efficiency and not equity, then

A) all points on the contract curve yield the same level of social welfare.
B) it will not rely on competitive markets to allocate goods.
C) it will maximize the utility of its worst-off member.
D) an equitable outcome is impossible.
Answer: A
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

28
Copyright © 2015 Pearson Education, Inc.
7) If a society relies on competitive markets to allocate goods, then
A) an equitable distribution is assured.
B) an equitable distribution is certain to not occur.
C) the competitive equilibrium will be Pareto-superior to any other.
D) social welfare as measured by consumer surplus plus producer surplus will equal zero.
Answer: C
Section: Efficiency and Equity
Question Status: Revised
AACSB: Analytic thinking

8) A dictator is most likely to

A) adopt a Rawlsian social welfare function.
B) maximize her own utility.
C) place equal weight on everyone's utility function.
D) have nontransitive preferences.
Answer: B
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

9) If society were to maximize the utility of its worst-off member, the final allocation would most likely be
A) relatively egalitarian.
B) on the contract curve.
C) Pareto-efficient.
D) one in which one person gets everything.
Answer: A
Section: Efficiency and Equity
Question Status: Revised
AACSB: Analytic thinking

10) If society were to maximize the utility of its best-off member, the final allocation would be
A) perfect equity.
B) on the contract curve.
C) Pareto-efficient.
D) one in which one person gets everything.
Answer: D
Section: Efficiency and Equity
Question Status: Revised
AACSB: Analytic thinking

29
Copyright © 2015 Pearson Education, Inc.
11) For most commonly used social welfare functions, an efficient allocation is
A) always preferred over any inefficient allocation.
B) not possible.
C) usually preferred.
D) never preferred.
Answer: C
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

12) The end of slavery in the United States represented

A) a large wealth transfer from the South to the North.
B) a large wealth transfer from the future to the present.
C) a large wealth transfer from Southern slave-holders to newly freed slaves.
D) a nominal wealth transfer from Southern slave-holders to newly freed slaves.
Answer: C
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

13) Comparing the distribution of wealth of the wealthiest 1% of the population in the United States
before and after the recent Great Recession to what occurred before and after the Great Depression,
A) the percentage of the wealth of the wealthiest 1% increased after the recent Great Recession, unlike
what happened after the Great Depression
B) the percentage of the wealth of the wealthiest 1% increased after the recent Great Recession, similar to
what happened after the Great Depression.
C) the percentage of the wealth of the wealthiest 1% declined after the recent Great Recession, unlike
what happened after the Great Depression.
D) the percentage of the wealth of the wealthiest 1% declined after the recent Great Recession, similar to
what happened after the Great Depression.
Answer: A
Section: Efficiency and Equity
Question Status: New
AACSB: Analytic thinking

14) The Arrow impossibility theorem suggests

A) democracies are doomed to fail in the long-run.
B) dictatorships are impossible in the long-run.
C) there is no universally applicable decision rule in a majority-rule democracy.
D) there is no way to make democracy better than a dictatorship.
Answer: C
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

30
Copyright © 2015 Pearson Education, Inc.
15) Most of the debates in the U.S. Congress center on
A) efficiency concerns.
B) equity concerns.
C) both efficiency and equity equally.
D) market inefficiency.
Answer: B
Section: Efficiency and Equity
Question Status: Revised
AACSB: Analytic thinking

For the following, please answer "True" or "False" and explain why.

16) At a given point in time, the Rawlsian welfare function gives equal weight to each individual's utility.
Answer: False. The Rawlsian welfare function gives a weight of 1 to the utility of the worst-off person
and a weight of zero to the utilities of all others.
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

17) Equity and efficiency can be achieved simultaneously through competition.

Answer: False. Equity involves value judgments and achieving it will usually result in lessened
efficiency.
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

18) The United States is the most inequitable country in the developed world.
Answer: False. Efficiency means how many goods to produce, and equity means how the goods are
allocated. They do not move in opposite directions. Even if one might say that the United States is the
most efficient country in the developed world, it does not mean that the U.S. is also the most inequitable
country.
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

19) If a market is controlled by one perfect price discriminator who is able to charge each consumer the
highest price that consumer is willing to pay, the seller will produce output until the price paid by the last
consumer is equal to the marginal cost of making the good. That is, the price of the last good equals the
marginal cost of making the good. If welfare is measured as consumer surplus plus producer surplus,
compare this market structure to a competitive market in terms of efficiency and equity.
Answer: A perfect price discriminator is Pareto efficient. Producer surplus plus consumer surplus is the
same as in a competitive market. From an equity standpoint, however, there is much less equity than in a
competitive market. A perfect price discriminator can capture all of the consumer surplus for herself,
leaving consumer surplus equal to zero.
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

31
Copyright © 2015 Pearson Education, Inc.
20) Explain why a government may select an inefficient allocation.
Answer: A government may decide the equity of an allocation makes it preferable to all possible efficient
allocations.
Section: Efficiency and Equity
Question Status: Old
AACSB: Analytic thinking

32
Copyright © 2015 Pearson Education, Inc.
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of What America
did
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.

Title: What America did

A record of achievement in the prosecution of the war

Author: Florence Finch Kelly

Release date: December 29, 2023 [eBook #72543]

Language: English

Original publication: New York: E. P. Dutton & Company, 1919

Credits: The Online Distributed Proofreading Team at

https://www.pgdp.net (This file was produced from images
generously made available by The Internet Archive)

*** START OF THE PROJECT GUTENBERG EBOOK WHAT

AMERICA DID ***
WHAT AMERICA DID
Troop Transport Leaving New York for France
 WHAT AMERICA DID
A Record of Achievement in the Prosecution of the
War

BY
FLORENCE FINCH KELLY

NEW YORK
E. P. DUTTON & COMPANY
681 FIFTH AVENUE
 Copyright, 1919,
By E. P. DUTTON & COMPANY

All Rights Reserved

Printed in the United States of America

 PREFACE
My purpose in this book has been to condense into a brief account
just those things that the ordinary man or woman wants to know
about how we prepared for and waged our share in the world war. I
have tried to picture the large outlines of achievement, to present the
important facts, and to show how it was all inspired and rushed
forward by the flaming spirit of the people. Volumes will be required,
and will of course be written, to tell comprehensively and in detail the
complete story of America’s many-sided effort in the prosecution of
the war. But I have sought, rather, to make such a book as would
meet the needs of the every-day reader by disregarding details and
weaving into the panorama of our war adventure only the essential
facts of each phase of war effort and the spirit by which it was all
unceasingly animated.
In such a volume, it seemed to me, there was no place for account
of the controversies that have raged over almost every step of
progress, nor for mention of criticisms or investigations or even of
the mistakes that delayed by a few weeks or a few months the
reaching of the peak of achievement in this or that particular. All of
them, doubtless, will be chronicled in those many volumes that will
tell the story of America’s participation in the war comprehensively
and in detail. Otherwise, they will all be forgotten in six months. It is
achievement that counts, and this book aims only to be a record of
things that were done.
But it is in no boastful spirit and with no vainglorious purpose that
“What America Did” is presented. There is no one of the millions who
shared in that doing but knows and is glad to say that beside what
Britain, or France, or Italy did or Belgium suffered America can only
stand with bent head and reverent heart. It is much to be desired that
a similar record, presenting outlines and essential facts within a
space possible for the reading of the average busy person, of the
achievements and sacrifices of each of these nations should be
prepared for our own and for coming generations. For the sum total
of their testimony would so utterly disprove the old, old lie that a
democracy can not be efficient and so summarily cast it into outer
darkness that men would never again say it or believe it as long as
time lasts. If this little volume is privileged to do its share toward
proving that “the highest and best form of efficiency is the
spontaneous coöperation of a free people” I shall feel it an honor to
have done the work of assembling and presenting its evidence.
To those many officials and temporary assistants of the
Government—they are far too many to mention separately—who
have given me their cordial and painstaking coöperation in my effort
to make all the facts and figures and statements of this work
accurate and authoritative I wish to acknowledge my very great
indebtedness. Without their constant and most courteous help the
book would have been impossible.
Florence Finch Kelly.
New York City,
May, 1919.
 CONTENTS
CHAPTER PAGE
Preface v
Foreword: Entering the War xiii
PART ONE
THE FIGHTING FORCES
SECTION I. ON LAND
I. The Making of the Army 3
II. Housing the Soldiers and Their Supplies 20
III. Feeding and Equipping the Army 24
IV. Creating a Munitions Industry 34
V. Caring for the Wounded 48
VI. The Welfare of the Soldiers 59
VII. Maintaining the Army in France 70
VIII. At the Front 83
SECTION II. BY SEA
IX. Expansion in the Navy 95
X. Operating an Ocean Ferry 105
XI. Working with the Allied Navies 113
XII. The Navy on Land 120
XIII. The Wings of the Navy 127
XIV. The Training of the Reserves 133
SECTION III. IN THE AIR
XV. Creating a New Branch of Warfare 139
 XVI. Providing the Means 143
XVII. Training the Men 151
XVIII. The Balloon Corps 160
XIX. Flying in France 163
XX. American Contributions 167
PART TWO
THE NATION BEHIND THE FIGHTERS
XXI. Financing the War 173
XXII. The Bridge of Boats 184
XXIII. Organizing the Nation 198
XXIV. Informing the Public 206
XXV. War-time Control of Trade and 220
Industry
XXVI. “The Greatest Mother in the World” 228
XXVII. Feeding the Nations 236
XXVIII. The Management of Fuel 250
XXIX. The Spirit of the People 260
XXX. Labor and the War 273
XXXI. Big-Brothering the Fighting Forces 283
XXXII. Running the Railroads 301
XXXIII. The Work of Women for the War 311
XXXIV. Fighting the Underground Enemy 327
XXXV. At the Heart of the Nation 338
 ILLUSTRATIONS
FACING
PAGE
Troop Transport Leaving New York for France Frontispiece
Cantonment Three Months after Construction was 16
Begun
Training a Machine Gun Company 16
Interior of a Cantonment Library 64
Dock in a French Port Developed by the United 72
States
Mobile Kitchen Back of the Front Lines 88
An American Big Gun in France 88
Troop Ships Entering Brest 105
Mine Barrage across the North Sea 112
Naval Gun on Railway Mount 128
Airplane Ambulance 152
American Flying Field in France 152
A Shipyard in the Making 192
The Fifty Shipways of the Same Yard 192
Wounded Men in a Hospital Weaving Rugs 232
Unloading Wheat at a French Port 248
In a Red Triangle Hut in the Battle Zone 288
A Pleasant Evening in a Hostess House 296
Salvation Army Lassies at the Front 296
Woman’s Land Army Members Sorting Potatoes 312
Training Camp of Woman’s Land Army 312
View from Washington Monument, August, 1917 340
Same View One Year Later 340
 WHAT AMERICA DID

FOREWORD: ENTERING THE WAR

When the United States entered the war, April 6th, 1917, she had
an army, including all the forces of the Regular Army, the National
Guard and the Reserve Corps, totaling 202,510 men and 9,524
officers, a navy not large but well prepared, and the nucleus of an
aeronautical section so small and undeveloped that it was negligible.
Behind these fighting forces that, except the navy, were insignificant
in comparison with the vast numbers of men swaying back and forth
across the battlefields of Europe was a nation that ever since its birth
had held the profound conviction, a fundamental of its political creed,
that this country should never allow itself to be drawn into the
quarrels of Europe.
Generation after generation had watched transatlantic wars blaze
up and go their bloody way and had seen their flames fed by racial
hates and jealousies, commercial greed, desire of territory, and
dynastic and personal ambitions. And each successive generation
had detested more deeply the whole foul crew of those motives and
had been more determined that America should have no concern in
the struggles they inspired. No one who does not understand how
deeply rooted was this conviction in the political beliefs and ideals,
the traditions, the very life of the American people can appreciate
what it meant to them to plunge into the war. It demanded no less
than a revolution in their methods of thought and in their attitude
toward the rest of the world. The Monroe Doctrine, moreover, which
for nearly a century had been almost as fundamental in our political
life as the Constitution itself, made our abstention from interference
in Europe a point of honor. For in its declaration that Europe must
keep its hands off the western hemisphere was the implied and
recognized obligation that the United States must keep its fingers out
of Europe.
Until within a few months of our entrance into the war the vast
majority of our people, probably no less than nine-tenths of those
who were reading and thinking about it, saw in it nothing more than
one of those recurring European quarrels, such as their fathers,
grandfathers, and great-grandfathers had watched from this side the
Atlantic with growing determination that this country should not be
entangled in their strife. All that vast majority believed profoundly that
the United States should hold aloof from this war for the same
reasons that it had kept out of the previous bloody struggles. The
American people can scarcely be blamed that they did not for a long
time perceive the real cause of the war—the desire of the German
Emperor and his people to win world dominion and establish a
German autocracy over the conquered peoples. For no nation, and
very few individuals, even among the near neighbors of Germany, at
first realized that this was the goal of the Kaiser and his Government.
Some of those nations had now and then apprehended danger, but
only each one for itself, but upon the fingers of one hand could be
counted the statesmen and publicists of Europe who perceived the
intention of world conquest, until the field-gray legions had been
started upon the adventure. And those few who had declared such a
conviction concerning German purpose had had their trouble for their
pains. For no one had heeded their warning. Slowly, as evidence
accumulated that convicted Germany out of her own mouth and was
surveyed in the light of the event to which it all pointed, did the
governments and peoples that were being attacked come to a
realization of the truth.
The American people were still longer in understanding the full
significance of the purpose with which Germany launched the war.
For their knowledge that through many centuries one after another of
the European powers had striven through blood and devastation and
agony to gain dominance over the others made them for a long time
heedless of the meaning of the accumulating evidence and led them,
in all honesty and conscientiousness, to absolve themselves of any
responsibility or obligation. German propaganda of the most
insidious and plausible sort, its sources well concealed, was busy
everywhere and, although it had no success in changing the
direction of the spontaneous sympathies of the people, it did aid in
preventing them from discerning for many months the real cause and
purpose of the war.
Moreover, that any nation in the twentieth century should lust for
world dominion and should set out to gain it seemed to the average
American mind so impossible, so insane a purpose that it was loath
to believe the truth. More and more evidence had to be accumulated
and pressed home, more and more proof of the satanic methods by
which the Germans were seeking to gain both their immediate and
their ultimate ends had to be shown the American people before they
could realize the full truth and the full significance of the German
purpose. Not until that purpose ceased to stagger their belief did the
sense of obligation begin to stir their spirits.
Hardly less universal and profound than the political conviction
that this nation should stay out of European entanglements and let
Europe settle her own quarrels in her own way was the moral and
intellectual conviction that war is a wasteful and wicked means of
bringing about any desired result. For more than a generation this
belief had been growing and striking deep root in the minds and
hearts of the American people. The nation that sprang to arms in
April, 1917, was a nation that loathed war from the bottom of its
heart.
So powerful and so universal were these convictions, that the
country should be kept aloof from European dissensions and that
war should be considered only as a last resort in a righteous cause,
that no leader could have put the country wholeheartedly into the
war until the masses of the people were convinced that the moment
had come when they must enter it. And they were not, in their
millions, thus convinced until the events near the end of 1916 and
early in 1917 had shown them the path they must take. Then it was
—and until then it would not have been—a united and determined
country that took up the cross of war and faced the ascent of Calvary
—how completely and closely united and how sternly determined the
pages of this book will try to show.
 PART ONE
THE FIGHTING FORCES
SECTION I. ON LAND.
 CHAPTER I
THE MAKING OF THE ARMY

The United States sprang into the greatest war the world has ever
known, a war in which men and machines and resources were being
consumed in enormous quantities, with an army numbering, all told,
only 212,000. The first necessity was to create, train and equip an
army that would, at the earliest possible moment, number millions of
men and thousands of officers. American sentiment had always
been strongly opposed to the principle of compulsory military service
and the only attempt the country had ever made to use the draft
system, during the Civil War, had caused dissatisfaction, disturbance
and riot in civil life and in its military results had been practically a
failure. Through many days of discussion in Congress and
throughout the country the question was threshed out, while
enlistments to the number of over 800,000 were swelling the ranks of
the Regular Army, National Guard and Reserve Corps organizations.
In the end, there was general agreement that only the draft system
could furnish the enormous numbers of men required and draw them
from civil life with democratic justice and with due regard to social
and economic interests.
As a large number of foreign born citizens had come here to
escape the compulsory military service of their native countries,
there were many grave fears of the result and it was even expected
that in centers of foreign population there would be riotous
demonstrations of protest. But those who were thus apprehensive
had not rightly estimated the intelligence, the democracy and the
Americanism of the whole citizenship of the country, foreign as well
as native born.
The success of the Selective Service Law, enacted by Congress
on May 18, 1917, was as spectacular as it was complete. The entire
machinery of registration, compilation and report was organized and
made ready for operation in the eighteen days following the
enactment of the law and was wholly manned by volunteer service
from civil life. On June 5th, in a single day, without disturbance or