1. Chapter 6 Section 3

2. 1. In a certain country, decisions regarding production and consumption of goods are based upon customs, beliefs, rituals, and habits. Over time, the economic system changes to one in which production decisions are based on competition and consumer choice. How has the economic system of this country changed? A. from a mixed economy to a command economy B. from a command economy to a mixed economy C. from a traditional economy to a market economy D. from a market economy to a traditional economy

3. 2. In a certain country, all decisions concerning the production of goods and services are made by the government. However, following a political revolution, a new economic system is set up in which some decisions regarding production of goods and services are made by the government and others are made by individuals and private companies. How has the economy of this country changed? A. from a mixed economy to a market economy B. from a command economy to a mixed economy C. from a market economy to a traditional economy D. from a traditional economy to a command economy

4. 2. In order to stimulate the economy, the United States government lowers personal income tax rates. Why would this action be expected to promote economic growth? A. Business would be required to hire more employees B. Manufactures would have to pay more for raw materials C. The government would be less likely to engage in deficit spending D. Consumers would have more money available to spend on goods and services

5. 4. How did the U.S. government’s role in the economy change as a result of the Great Depression? A. The federal government had a reduced role in regulating economic activity B. The federal government maintained the role it had economic matters before the Great Depression. C. The federal government expanded its role in regulating economic activity and promoting economic growth D. The federal government transferred its role in economic affairs over to the state government

6. 5. How does antitrust legislation affect business? A. It makes it more difficult to import goods into the United States. B. It unfairly raises taxes on domestic goods. C. It makes it impossible for one company to control an entire industry. D. It reduces the influence of labor unions.

7. 6. How have labor unions affected the U.S. economy? A. They have campaigned for the legalization of monopolies. B. They want to get rid of child labor laws. C. They helped pass laws to make better working conditions. D. They tell the government what goods and services should be produced.

8.  Vertical integration  Horizontal consolidation  Social Darwinism  Laissez-faire  Oligopoly  Monopoly  Holding company  Sherman Antitrust Act

9.  Born in Scotland and came to U.S.(1848) at the age of 13.  Cotton mill – worked 12 hr days, six days a week  Became messenger for a telegraph service and worked his way up the ladder.  Thomas Scott (supt of Pennsylvania RR) hired him as private secretary.  Scott gave him chance to buy stock. Mother mortgaged family home.

10.  Continued to buy stock – earned enough to leave his RR job and entered steel business.  One of the first industrial mogul to make his own fortune.

11.  Carnegie’s Management Techniques  Searched for ways to make better products more cheaply  Attracted talented people to his operations  Offered them stock and encourage competition among them to increase production  Carnegie’s Business Strategies  Vertical integration  Horizontal consolidation

12.  Buying out of all your suppliers  Carnegie attempted to control all of the steel industry  Bought out coal and iron mines and railroad lines  Controlling the raw materials, transportation systems, and every stage of manufacturing  Gives total power over the quality and cost of the product

13.  Company buys out or merges with its competitors.  Carnegie almost monopolized the steel industry by gaining control over both his suppliers and his competition

14.  Economic theory based on Darwin’s theory of biological evolution  Economist used this theory to justify the doctrine of “laissez faire” (allow to do)  Spencer - Free competition in the economy (like natural selection in the biological arena) would ensure survival of the fittest.  Sumner – success and failure in business were actually governed by natural law and that no one – particularly the government had the right to intervene

15.  Can’t beat them join them  Oligopoly – a market where only a few sellers provide a particular product. Businesses producing a similar product join together.  Horizontal consolidation took the form of mergers. Usually happened when one corporation bought out the stock of another.  Firm that could buy out all of its competitors could achieve a monopoly. P. 937

16.  Holding Company  Corporations that buy out the stock of other companies  J.P. Morgan headed United States Steel bought Carnegie Steel making it the world’s largest business organization  Trust  Large corporation made up of many companies that received certificates entitling them to dividends on profits earned by all the companies combined  John D. Rockefeller; Standard Oil Company  Trust were not legal mergers, but JDR made most of grey area

17.  1870 Standard Oil Company of Ohio processed 2-3% of country’s crude oil to 90% within a decade  Paid employees extremely low, drove competitors out of business by selling oil lower than cost to produce, then hiked up prices to earn his money back when he had control of the market.

18.  Robber Barons - nickname given to Rockefeller, Morgan, Carnegie b/c of ruthless tactics  Defended their wealth by pointing to their charities

19.  Governments attempt to stand against monopolies  Made trusts illegal in interstate and international trade; made it possible to prosecute companies  Nearly impossible to enforce  Didn’t clearly define terms such as trusts  Simply dissolved trusts and reorganize into single corporations

20.  North boomed b/c of natural and urban resources  South  Physical devastation from Civil War  Northern businesses owned 90% of profitable stock in Southern businesses  Handicapped by high transportation cost and tariffs  Growth - tobacco, furniture, textile, forestry, mining  Northern wage earners and Southern labors = both low pay, poor working conditions