John D. Rockefeller
A Little Facts and History About Monopolies
A monopoly occurs when a firm makes a product that has no close substitute for
that product. The firm then can set the prices as high as they want. The two kinds of
monopolies are perfect monopoly and imperfect competition. A perfect monopoly
occurs when a firm is the only supplier and there are no close substitutes. Imperfect
competition occurs when a firm is large enough to have some, but not complete, control
over the prices the can charge their customers.
Imperfect competition can be divided up into monopolistic competition, oligopoly
and natural monopoly. Monopolistic competition occurs when there are many
producers of products that are the same, but each producer tries to convince the
consumers that their product is better. When the producer succeeds they will have the
monopolist power. Such firms as medicine and cereal companies have monopolistic
powers. When there are few producers of the same product with a high price and
similar services they work as if they where a big monopoly, this is called a Oligopoly.
Natural monopolies occur when a firm Needs large amounts of money and it would be
inefficient if one or more firms are in the area. Natural monopolies are the only legal
monopolies. The natural monopolies are regulated by the government which sets the
prices the firms can charge. Natural monopolies include the gas and electric
companies.
In establishing monopolies the following are important to create a monopoly:
control of a major resource necessary to produce a product, technological capabilities
that allow a single firm to produce at reasonable prices all the out put of a particular
commodity or service, exclusive control over a patent on a product or the process, used
to produce the product: and a government franchise that awards a company the sole
right to produce a commodity or service in a given area.
John D. Rockefeller created a monopoly in the oil industry. Rockefeller first
began in a firm called Andrews, Clarks and Company later bought it out and gained
complete control over it. Rockefeller creates Standard Works in New York for
exporting the Oil. Then in 1867 he created Rockefeller, Andrews and Flager. In 1868
they where the largest refiners in the world. Rockefeller built Higher quality, larger and
better planed refineries; they owned their own barrel making plant, which cut the cost
of barrels in half; They manufacture their own sulfuric acid, which was used in the
purification process; He owned his own drayage services; warehouses; The first to
ship oil via tank cars' built their own holding tanks; any wastes created by their
products where made into a product used for something else, such as gasoline; and he
had use of railways, pipelines, and ships to ship the oil. Rockefeller made it cheaper
than any one else so he could sell it cheaper and buy up more firms that where going
out of business. By the end of March and the beginning of April of 1872, Rockefeller
owned or merged with most of the firms in Cleveland. He dismantled the smaller firms
and upgraded the larger firms to fit his standards. In the year 1870 he creates
Standard Oil of Ohio. By that time he owns 10 percent of the oil business. By 1879
Standard Oil did about 90 percent of the refining in the United States with almost 70
percent being exported. Standard’s biggest competitor was the Tidewater Pipe-line
Company. In 1888 Rockefeller tries to buy it out or merge with it but he fails. By the
time Rockefeller was 43 there where 35,000 shares and Rockefeller held 9,585 shares.
By 1890 Standard wanted more households to use their product, so they has made
grocery and hardware stores that sold kerosene and lubricants to sell only Standard
products. By 1896 Rockefeller retired at the age of 48, but kept his retirement secret.
When the prices were raised and legal action was taken Rockefeller was blamed for it.
Rockefeller created a oligopoly. He had control over a natural resource and the
technology to keep the prices lower than his competitors. He did not just hurt the oil
industry but he help it. Rockefeller developed a method to treat sour oil and devised
technology to reuse sulfuric acid.
Is Ticketmaster a monopoly? The question arose when Pearl Jam filed a suit
against them in 1994. Ticketmaster the biggest firm selling tickets. With not much
competition they could set their prices as high as they wanted. Ticketmaster’s last
major competition which was Ticketron which sold out to Ticketmaster in 1991.
Ticketmaster replied that the only reason why they are the only people in the ticket
sales services is because the strongest survive and they are the strongest.
Ticketmaster’s last competitor Ticketron was sold out to Ticketmaster in 1991. The
U.S. justice department ruled that Ticketmaster was the strongest and they have not
forced up the prices. They also said that if Ticketmaster was broken up it would no
other firm would be as efficient as it was. Ticketmaster was also lending out money to
the concert tours so that the show will go on. Ticketmaster did not try to monopolize
the ticket selling service, but they just competed the hardest and survived.
The most recent monopoly is Microsoft. They are accuse of trying to run the
Internet. Microsoft has force computer producers to put their product in the computers.
So that more people would use their product. Many experts say that if the Microsoft
browser users increase Microsoft could lock up the prices and raise the prices before
the law catches up to them. The Justice Department is still looking in to it. The
question is if Microsoft is just competing hard or are they just waiting to raise the prices.
Bill Gates
Monopolies are illegal according to the anti-trust laws used to break up Standard
Oil and maybe Microsoft.
Monopolies don’t only exist in the United States, but exist every where in the
world. Most monopolies are illegal in other countries, many have tried to monopolize
the industry, but government laws and regulations have stooped them. The
government keeps track of what they can, but it is hard to watch who wants to
monopolize the industry. Then the government has to decide if they are competing
hard or just want to raise the prices.
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