Chapter 17



Chapter 17

Industrial Expansion and Concentration

General Questions

1. Which of the following statements provides the most accurate description of the employment growth rate in various sectors of the economy between 1860-1910?

a. All major sectors grew with the exception of agriculture and construction.

b. All major sectors grew, and agriculture grew the most.

c. The manufacturing sector grew the most, followed by railroads, but agricultural employment decreased.

d. All major sectors grew, and railroads grew the most.

2. The leading producer of manufactured goods in 1900 was

a. the United States.

b. Germany.

c. England.

d. Canada.

3. In U.S. v. U.S. Steel Corporation, the Supreme Court ruled that

a. U.S. Steel had violated the Sherman Act, particularly by organizing meetings with competitors such as the “Gary Dinners.”

b. despite the fact that U.S. Steel controlled 50 percent of output in the steel industry, the company had not achieved monopoly power.

c. large corporations, by definition, violate the Sherman Act.

d. the Sherman Act did not apply to U.S. Steel because steel manufacturing was an activity “clothed with a public interest.”

4. The term “_____” denotes the adaptation of new technological ideas to existing products and services.

a. invention

b. merger

c. innovation

d. economies of scale

5. In the late 1800s and early 1900s, the primary source of energy for manufacturing was

a. coal.

b. petroleum.

c. water.

d. electricity.

6. The McCallum management principles advocates the use of

a. time-motion study to determine the most productive way to perform job-tasks.

b. employee stock-purchase programs.

c. internal accounting systems and performance evaluations.

d. leveraged buy-outs to increase the firm's control of an industry.

7. Henry Ford is most recognized for:

a. inventing new technology to further the steel production process.

b. developing the first investment banks.

c. implementing the first progressive, moving assembly-line system for large, complex final products.

d. playing an integral role in developing the first American factory.

8. By 1916, there were 340,000 corporations in the United States. The growth in the number of corporations was partly due to

a. increasing numbers of urban dwellers.

b. the development of formal markets for stocks and bonds.

c. the acceptance by most states of the doctrine of limited liability.

d. mass production which led to lower per-unit costs for output.

e. all of the above.

9. According to Alfred Chandler, large vertically integrated firms dominated much of American manufacturing in the early 1900s because

a. U.S. manufacturers sought to emulate the production practices of European manufacturers.

b. U.S. tax laws created strong incentives for vertical integration.

c. continuous-flow technologies were cost minimizing only when the inflow of inputs and the sale of outputs proceeded without interruption.

d. larger firms were better able to fight the establishment of labor unions and collective bargaining arrangements.

10. As a means of gaining monopoly power, holding companies were preferable to gentlemen’s agreements and pooling because holding companies

a. did not have adverse impacts on employment.

b. were able to reduce competition from imported goods.

c. were legal in most states.

d. were not subject to corporate profits taxes.

11. A _________ is an agreement under which stockholders of several formerly competing companies turn over their shares to a group that exercises voting control over the companies.

a. trust

b. gentleman’s agreement

c. holding company

d. pooling arrangement

12. A “vertically integrated firm” is a firm that

a. combines firms which formerly competed.

b. manages all stages of production, from the production of raw materials to the marketing of the final product, within the firm.

c. earns zero economic profits due to the highly competitive market within which it operates.

d. has representatives on its board of directors from many of the companies that it buys from and sells to.

13. John D. Rockefeller is most recognized for

a. developing the oil industry.

b. being an early promoter of the computer industry.

c. lobbying the government for the abolition of slavery.

d. inventing new technology to further the steel production process.

e. being an initial supporter of minimum wage laws.

14. Which of the following statements presents accurate information about the Standard Oil merger?

a. The Standard Oil merger is an example of a vertical merger.

b. Standard Oil was initially organized as a holding company.

c. The petroleum refining industry was never particularly competitive, and was dominated by a few large firms even prior to the Standard Oil merger.

d. Following the merger, Standard Oil controlled 90 percent of U.S. refining capacity.

e. all of the above

15. Which of the following is an example of a horizontal merger?

a. the consolidation of marketing, processing and purchasing departments by Armour Meat Company

b. the purchase of E.C. Knight Company by American Sugar Refining Company

c. the purchase of Colorado silver mines by the Tiffany Jewelry Company

d. Federal Steel Company’s alliance with American Bridge Company

16. In U.S. v. Addyston Pipe and Steel Company (1898), the Supreme Court ruled that

a. horizontal mergers were a violation of the Sherman Act.

b. vertical mergers were a violation of the Sherman Act.

c. collusive agreements among competing firms were a violation of the Sherman Act.

d. mergers that created “corporate monoliths” were a violation of the Sherman Act.

Economic Insights

1. Henry Bessemer is most recognized for

a. the invention of air brakes for trains.

b. his role as an early union leader.

c. invention of a steel manufacturing process.

d. the development of refrigerated train cars.

2. What best describes the changes in steel production from 1860-1910?

a. The open-hearth process quickly became the dominant production process after it was invented.

b. Technological change in steel production changed relatively slowly.

c. No technological changes occurred in the steel industry.

d. The production of steel stayed constant through this period, but it became much more efficient.

3. “Trust busting,” including the prosecution of the American Tobacco Company and Standard Oil, was a high priority of whose administration?

a. Franklin Roosevelt

b. Ulysses S. Grant

c. James Garfield

d. Theodore Roosevelt

4. In 1911, the Supreme Court ordered the dissolution of both Standard Oil and the American Tobacco Co. In these decisions, the Court held that all except which of the following were grounds for antitrust violations?

a. predatory practices that occur in a firm's growth period

b. the use of "kickbacks" and rebates

c. the size of the firm relative to other firms in the same market

d. the use of price wars to weaken competing firms

Economic Analysis

1. Recall the text’s discussion of the ten largest U.S. industries by value added in 1860 and 1910. The emergence of tobacco products and malt liquors as major industries by 1910 suggests that these goods

a. are highly income elastic.

b. are highly income inelastic.

c. are price inelastic.

d. exhibit economies of scale in production.

2. Based on evidence from the turn of the century, the income elasticity of flour and meal

a. is greater than one.

b. is less than one.

c. approaches infinity.

d. equals zero.

3. A monopsony is a market in which

a. one firm is the sole producer of a good or service.

b. one firm is the sole buyer of a good or service.

c. firms encourage competition by starting “price wars” among competitors.

d. firms collude in setting prices and levels of output.

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