Economic Impact Of Monopolies

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We support the statement ‘Monopolies have led to the success of many economies in the world, and therefore, they should be maintained by government if they want their economies to continue enjoying economic growth and prosperity’. This is because monopolies are large in size, they benefit from economies of scale and are able to generate a huge amount of profit- larger than other market structures. With this money, they can invest in research & development, improving their existing products and creating new ones. Moreover, monopolies have a great impact on a country’s economy. Two very large monopolies that positively impacted the United States economy is Standard oil and Steel Company. Standard Oil Company, America’s first successful multi-national…show more content…
In 1865, Rockefeller borrowed money to buy out some of his partners and take control of the refinery, which had become the largest in Cleveland. Over the next few years, he acquired new partners and expanded his business interests in the growing oil industry. At the time, kerosene, derived from petroleum and used in lamps, was becoming an economic staple. Years later in 1870, he established Standard Oil. By the early 1880’s, 90 percent of all refineries and pipelines in the U.S was controlled by Standard Oil. By buying rival refineries and developing companies around the world to distribute and market their products, the company was able to become a monopoly (History.com, 2010). Rockefeller began expanding beyond Ohio and vertically integrating his monopoly in order to make full use of economies of scale. He ensured that Standard Oil controlled almost every step in the process of oil production and distribution, from drilling, the refining, building its own barrels, employing scientists to figure out new uses for petroleum by-products, and controlled all storage and the delivery processes. Rockefeller became one of the world’s wealthiest men and a major philanthropist. In…show more content…
Standard Oil built a nationwide infrastructure that did not depend on trains any longer, with their fluctuating costs. After the company was dismantled, costs and the overall prices of petroleum products decreased, because of Standard Oil. The size of Standard Oil allowed it to undertake projects that disparate companies could never agree on and, in that sense, it was as beneficial as state-regulated utilities for developing the U.S. into an industrial nation (Beattie, 2007). Oil became America’s biggest industry because of Standard Oil. Rockefeller provided an extremely useful and needed product that the industrializing country needed- kerosene, lubricants, and gasoline for automobiles (Rose, 2014.) Furthermore, the practice of being efficient was adopted by Standard Oil and this greatly impacted the US economy. All parts of the oil was used in the process of production, in order to achieve a high level of production and did not waste. For example, Vaseline was created with the use of the residue left over from the refining processes. Because of Standard Oil’s size, the company had the ability to take over projects that smaller companies would not have been able to accomplish. This in turn, helped in developing the growth of the United States as an industrial nation. Whether these projects were reducing the prices of railroad rates or opening up new refineries, they all positively affected the

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