13.2 Flashcards
What is a Monopoly?
Complete control of a product or service.
Corporation or business either bought out its competitors or drove them out of business.
Sole remaining company was free to set its own prices since consumers had no other choice.
What is a Cartel?
Another method of eliminating competition in business.
Businesses making the same product agree to limit their production and thus keep prices high.
Who was John D. Rockefeller?
Oil tycoon
Made deals with railroads to increase profit: railroads would no longer transport to other businesses.
Killed other businesses and eliminated competition.
What is Horizontal Integration?
Consolidates many firms into the same business.
Giant company with lower production costs.
Rockefeller tried this method
What difficulties did Rockefeller face?
While trying to eliminate his competition, Ohio state law prevented one company from owning the stock of another.
Because of this Rockefeller could not buy out his competitors.
What was the solution to Rockefeller’s problem?
Trusts
What is a trust?
In a trust, companies assign their stock to a board of trustees who combine them into a new organization.
Trustees run the organization, paying themselves dividends on profits.
Who was Andrew Carnegie?
Steel Tycoon
Used vertical integration
Most successful steel maker
Established many charitable organizations
What is vertical integration?
Allowed companies to reduce costs and charge higher prices to competitors.
Took control of all businesses regarding a products development in all phases.
Ex) Andrew Carnegie
What is Social Darwinism?
Charles Darwin published “On the Origin of Species”
Stated that animals evolved through process of natural selection; the best fit survived.
William Graham Sumner applied the theory to American capitalism.
Declared that wealth was a measure of one’s inherent value and those who had it were the most “fit”.
What was the Interstate Commerce Commission?
ICC
Created by the US Senate to oversee railroad operations.
Could only monitor railroads that crossed state lines.
Could not make laws or control the railroad’s transactions.
Could investigate for unfairness.
What is the Sherman Antitrust Act?
Outlawed any trust that operated “in restraint of trade or commerce among the several states”
Seldom enforced at first.
Often used in the corporation’s favor, saying labor that unions restrained trade.
What did the ICC and Sherman Antitrust Act begin?
The government’s monitoring of government
Federal limitations on corporations’ power
What is a Corporation?
Developed in order to take advantage of expanding markets.
A number of people share the ownership of a business.
If they experience economic problems, the investors lose no more money than they had originally invested in the business.
Had the same rights as an individual; buy and sell property, sue in the courts.
