An Age of Big Business and Corporations
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Questions and Answers

What significance did Pittsburgh hold in the steel industry during the rise of steel production in the late 19th century?

Pittsburgh became known as the steel capital due to the establishment of large steel mills in the region, particularly in the 1870s.

Who was Andrew Carnegie and what was his role in the steel industry?

Andrew Carnegie was a key figure in steelmaking who built a steel plant near Pittsburgh and dominated the steel industry by 1890.

Explain the concept of vertical integration as practiced by Carnegie in his steel business.

Vertical integration involved Carnegie acquiring companies at all stages of production, from raw materials to transportation.

What role did the Bessemer process play in the expansion of Carnegie's steel production?

<p>The Bessemer process allowed Carnegie to produce steel more efficiently and at a lower cost, meeting the growing market demand.</p> Signup and view all the answers

How did Carnegie's business strategies impact competition in the steel industry?

<p>Carnegie's strategies, particularly his control over the entire steel production process, made it difficult for other companies to compete.</p> Signup and view all the answers

What event in 1859 sparked the oil boom in western Pennsylvania?

<p>Edwin L. Drake's oil strike.</p> Signup and view all the answers

Who was the founder of the Standard Oil Company?

<p>John D. Rockefeller.</p> Signup and view all the answers

What business strategy did Rockefeller use to grow Standard Oil?

<p>Horizontal integration.</p> Signup and view all the answers

What is a trust in the context of the oil industry?

<p>A group of companies managed by a single board of trustees.</p> Signup and view all the answers

What was the outcome of Rockefeller's actions in the oil industry?

<p>He created a monopoly.</p> Signup and view all the answers

What material became essential for producing railroad tracks and bridges during this era?

<p>Steel.</p> Signup and view all the answers

In which city did Rockefeller and his partners build the first Standard Oil refinery?

<p>Cleveland, Ohio.</p> Signup and view all the answers

What effect did higher dividends have on shareholders of competing oil companies?

<p>They traded their stock for Standard Oil stock.</p> Signup and view all the answers

What significant discovery did Edwin L. Drake contribute to in 1859?

<p>Edwin L. Drake drilled the first successful oil well in Titusville, Pennsylvania, leading to significant oil production.</p> Signup and view all the answers

List the three factors of production mentioned in the content.

<p>The three factors of production are land, labor, and capital.</p> Signup and view all the answers

How did new technology and business methods affect the economy after the Civil War?

<p>They allowed business leaders to utilize natural resources effectively, transitioning the economy from farming to industry.</p> Signup and view all the answers

What role do entrepreneurs play in business, according to the content?

<p>Entrepreneurs are individuals who start businesses and need to raise capital to fund their operations.</p> Signup and view all the answers

What is a corporation and why do companies choose to become one?

<p>A corporation is a legally defined organization that allows many owners and can raise capital through selling stock.</p> Signup and view all the answers

What portion of the nation's steel was produced by the Carnegie Steel Company by 1900?

<p>One third of the nation's steel.</p> Signup and view all the answers

Which famous concert hall was funded by Andrew Carnegie?

<p>Carnegie Hall.</p> Signup and view all the answers

What is the purpose of selling stock in a corporation?

<p>Selling stock raises funds that can be used to buy raw materials, equipment, and cover operational costs.</p> Signup and view all the answers

What was the purpose of philanthropy as practiced by industrial millionaires like Carnegie and Rockefeller?

<p>The use of money to benefit the community.</p> Signup and view all the answers

Who are shareholders and what do they receive if the corporation does well?

<p>Shareholders are individuals who invest in a corporation by buying stock and receive dividends if the company is profitable.</p> Signup and view all the answers

Which type of business was the first to form corporations, according to the content?

<p>Railroads were the first businesses to form corporations.</p> Signup and view all the answers

What was a holding company, and how did it impact businesses in New Jersey in 1889?

<p>A holding company could gain power over multiple companies by buying their stock, facilitating the trend toward monopolies.</p> Signup and view all the answers

What major legislation was passed by Congress in 1890 to address monopolies?

<p>The Sherman Antitrust Act.</p> Signup and view all the answers

How did the lack of competition affect large corporations according to the document?

<p>Corporations were under no pressure to improve their products or services.</p> Signup and view all the answers

Name one significant institution established by John D. Rockefeller.

<p>The University of Chicago.</p> Signup and view all the answers

How many libraries did Carnegie fund worldwide?

<p>More than 2,000 libraries.</p> Signup and view all the answers

What is horizontal integration, and how did Rockefeller use it to grow Standard Oil?

<p>Horizontal integration is the process of acquiring or merging with competitors to increase market share. Rockefeller used it to eliminate competition and control a significant portion of the oil industry.</p> Signup and view all the answers

How did Rockefeller drive competitors out of business?

<p>He drove competitors out of business by lowering oil prices, making it difficult for them to compete profitably.</p> Signup and view all the answers

What strategies did Rockefeller use to pressure customers and influence railroads?

<p>Rockefeller pressured customers by offering lower oil prices and influenced railroads through secret deals that secured rebates and discounts for transporting his oil.</p> Signup and view all the answers

How did the formation of a trust help Rockefeller gain control over competing companies?

<p>The formation of a trust allowed Rockefeller to consolidate control over multiple companies, making decisions collectively to eliminate competition.</p> Signup and view all the answers

What is a monopoly, and how did Rockefeller create one in the oil industry?

<p>A monopoly is a market structure where a single company dominates the entire market for a product or service. Rockefeller created one by acquiring numerous oil companies to eliminate competition and control prices.</p> Signup and view all the answers

What role did secret deals and networking play in Rockefeller's business success?

<p>Secret deals and networking allowed Rockefeller to forge beneficial relationships with influential figures, giving him a competitive edge.</p> Signup and view all the answers

In what ways did Rockefeller's pricing strategies impact the oil market?

<p>Rockefeller's pricing strategies led to aggressive competition among oil suppliers, causing many to lower their prices or exit the market.</p> Signup and view all the answers

How did rebates from railroads contribute to Rockefeller's success?

<p>Rebates from railroads lowered transportation costs for Rockefeller, allowing him to offer competitive prices.</p> Signup and view all the answers

What impact did Rockefeller's strategies have on consumers in the oil market?

<p>Rockefeller's strategies initially led to lower prices for consumers, but ultimately resulted in less competition and higher prices.</p> Signup and view all the answers

How did Rockefeller's competitive practices reflect the principles of capitalism?

<p>Rockefeller's competitive practices reflected the principles of capitalism by promoting innovation, efficiency, and market dominance through competition.</p> Signup and view all the answers

Flashcards

Petroleum

A sticky black oil found underground, used initially for medicine but later discovered to be useful for heating, lighting, and lubricating machinery, eventually leading to the creation of the multimillion-dollar petroleum industry.

Drake's Well

A well dug in Titusville, Pennsylvania in 1859, by Edwin L. Drake, that successfully extracted large amounts of petroleum, marking a significant turning point in the development of the petroleum industry.

Factors of Production

The resources needed for a growing economy, including land, labor, and capital.

Entrepreneurs

Individuals who start businesses and take risks to bring new products and services to the market, often needing to raise capital to fund their ventures.

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Corporation

A legally defined organization with many owners, allowing businesses to grow large by pooling resources. Corporations often sell shares of ownership, known as 'stock,' to raise capital.

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Shares (Stock)

A portion of ownership in a corporation, acquired by buying stock.

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Shareholders

People who invest in a company by purchasing shares (stock), aiming to earn dividends when the company performs well.

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Dividends

A portion of a company's profits distributed to shareholders, typically as a cash payment, rewarding them for their investment.

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Oil Rush

The rapid development and growth of the oil industry, marked by oil discoveries and the emergence of oil towns.

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Oil Refinery

A plant for processing oil, turning crude oil into usable products.

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Horizontal Integration

A business strategy where companies in the same industry merge under a single corporation, eliminating competition and gaining market dominance.

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Standard Oil Company

John D. Rockefeller's company that aimed to dominate the oil industry through horizontal integration and strategic acquisitions.

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Trust (Business)

A group of companies controlled by a single board of trustees, effectively creating centralized management and control.

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Monopoly

Exclusive control over a particular industry by a single producer, eliminating competition and often leading to higher prices.

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Steel

A strong and durable metal widely used in infrastructure, particularly for railroads and bridges, becoming prominent in the late 19th century.

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Industrial Era

The era of rapid industrial growth and technological advancements in the United States, driven by new inventions and innovations.

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Bessemer Process

A method of producing steel involving blowing air through molten iron to remove impurities, resulting in a more durable material.

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Vertical Integration

A business strategy where a company controls every step of production, from acquiring raw materials to manufacturing and distribution, aiming to reduce costs and gain market dominance.

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Andrew Carnegie

Andrew Carnegie, a Scottish immigrant, rose to become the leading figure in American steel production.

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Steel Production Hubs

Cities transformed into centers of steel production in the late 19th century, benefiting from technological advancements like the Bessemer process and increased demand for steel.

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Technological Advancements in Steelmaking

The creation of new technologies and processes made steel production more efficient and affordable, boosting demand for the material.

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Philanthropy

The practice of using wealth to benefit the community.

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Holding Company

A company that controls multiple other companies by buying their stock, gaining significant power.

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Merger

The act of merging two or more companies into one larger entity.

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Sherman Antitrust Act

A law passed in 1890 to curb the power of monopolies and trusts, aiming to prevent unfair business practices.

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Trust

A group of companies that work together to control prices and eliminate competition, often considered illegal, as they hurt consumer choices.

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Philanthropy

The act of using money to benefit the community, often undertaken by wealthy individuals with a desire to make a positive impact.

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Holding Company

A corporation that buys the stock of other companies to gain control, forming a larger, often powerful entity.

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Predatory Pricing

Lowering prices, often below cost, to drive competitors out of business. Rockefeller used this tactic to force smaller oil producers to go bankrupt.

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Secret Deals and Networking

Secret agreements giving special advantages to certain businesses, like railroads giving Rockefeller cheaper rates to transport oil, making it difficult for rivals to compete.

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Rockefeller's Tactics with Railroads

Rockefeller pressured railroads to give him lower rates in exchange for large volumes of oil transport. He also used rebates and discounts to gain an advantage.

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Rockefeller's Tactics with Customers

Rockefeller used his control over Standard Oil to pressure customers to buy from him and not from his competitors, effectively creating a monopoly.

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Study Notes

An Age of Big Business

  • Petroleum became valuable in the 1850s due to its use as a heat source and lubricant.
  • Edwin Drake's oil well in 1859 in Titusville, Pennsylvania, marked the start of a major petroleum industry.

Factors of Production

  • Economists refer to land, labor, and capital as the factors of production.
  • Land includes natural resources like petroleum, coal, and timber.
  • Labor refers to workers who transform raw materials into goods/services (factory workers, technicians, miners, etc).
  • Capital represents tools, buildings, machines, and money used to produce goods/services.

Finding Capital for Expansion

  • Entrepreneurs needed capital (money) to expand their businesses.
  • Corporations, a type of business organization with multiple owners, became a method to raise capital by selling stock.
  • Stock represents partial ownership (shares) in a company.

The Rise of Corporations

  • Corporations allowed companies to grow and raised capital to further that growth.
  • Businesses like railroads were among the first to form corporations.
  • The rise of corporations fueled industrial growth in the late 1800s.

The Growth of Oil

  • As news of Edwin Drake's discovery spread, interest in western Pennsylvania (oil rush) soared.
  • Towns like Oil City and Petroleum Center developed quickly.

Rockefeller and Standard Oil

  • John D. Rockefeller was a key figure in the oil industry.
  • Rockefeller used horizontal integration (combining companies of the same type).
  • He formed the Standard Oil Trust, which controlled a large portion of the oil industry by gaining partial ownership and control over other companies.
  • Rockefeller successfully used strategies like lowering prices and influencing businesses to drive competitors out of business, increasing his company's influence.

Carnegie and the Steel Industry

  • Henry Bessemer and the open-hearth process made steel production more efficient and affordable.
  • Andrew Carnegie became a leading figure in the steel industry.
  • Carnegie implemented vertical integration (acquiring companies at different stages of production).
  • Carnegie Steel Company controlled nearly a third of the nation's steel production by 1900.

Millionaires and Philanthropists

  • Industrial leaders like Carnegie and Rockefeller became philanthropists.
  • They invested significant funds in community projects, such as schools, libraries, and universities.

Corporations Grow Larger

  • Holding companies emerged as techniques to control multiple businesses in different industries.

  • Some people favored large corporations while others saw them as detrimental to competition.

  • The Sherman Antitrust Act, passed in 1890, aimed to reduce the power of large businesses, and monopolies.

  • Horizontal Integration involved merging competing companies to control markets .

  • Vertical Integration involved acquiring and controlling the various stages of production to minimize costs.

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Lesson 3: An Age of Big Business PDF

Description

Explore the significance of the petroleum industry, the factors of production, and the rise of corporations. This quiz delves into how these elements contributed to the growth of big businesses after the 1850s. Assess your understanding of these foundational economic concepts.

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