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Understanding Monopoly and its Impact on Markets

This lesson explores the objective of Monopoly, how a player achieves a monopoly, the concept of rent in owning railroads, and the rationale behind charging higher rent when monopolizing the RR industry. It also discusses market structures, the negative impact of noncompetitive markets, and the use of mergers to reduce competition.

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Understanding Monopoly and its Impact on Markets

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  1. 1. What is the objective of Monopoly? 2. How does a player achieve a monopoly? 3. If I own a railroad and you land on that railroad, how much “rent” will you owe? What if I own 2 RRs? What if I own 3 RRs? What if I own all 4 RRs? 4. If you monopolize the RR industry, why can you charge more for “rent”?

  2. 1. What is the objective of Monopoly? 2. How does a player achieve a monopoly? 3. If I own a railroad and you land on that railroad, how much “rent” will you owe? What if I own 2 RRs? What if I own 3 RRs? What if I own all 4 RRs? 4. If you monopolize the RR industry, why can you charge more for “rent”?

  3. Lesson 2.5 Market Structures Essential Questions: How do monopolies, oligopolies, and other noncompetitive markets negatively impact consumers? How are mergers used to reduce competition?

  4. Market Structures

  5. Market Structures

  6. Market Structures

  7. Market Structures

  8. Market Structures

  9. Market Structures What are the benefits of competition among sellers/businesses?

  10. “It seemed to be an intellectual necessity for him [John D. Rockefeller] to be able to direct the course of any particular gallon of oil from the moment it gushed from the earth until it went into the lamp of a housewife. There must be nothing-nothing in his great machine he did not know to be working right. It was to complete this ideal, to satisfy this necessity, that he undertook, late in the seventies [1870s], to organize the oil markets of the world, as he had already organized oil refining and oil transporting. Mr. Rockefeller was driven to this new task of organization not only by his own curious intellect; he was driven to it by that thing so abhorrent to his mind - competition. If, as he claimed, the oil business belonged to him, and if, as he had announced, he was prepared to refine all the oil that men would consume, it followed as a corollary that the markets of the world belonged to him…”

  11. Questions: • How did Rockefeller use both horizontal mergers and vertical mergers to monopolize the oil refining industry? • How did Rockefeller collude to increase profits? • What happened to the Standard Oil Company? • How did Rockefeller abuse his economic and political power while controlling the Standard Oil Company?

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