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History of monopolies in the United States.

Key Economic Concepts:

• Competition
• Regulation

Description:

Monopolies in the United States have existed in many forms. When a business dominates a market, its market power makes it a monopoly. How these businesses use their market power will determine the legality of the monopoly.

Lesson Objectives:

Students will:

• Define market, monopoly, entrepreneur, natural monopoly, and profit.
• Examine the rise of monopolies in the United States.
• Analyze the effect of monopolies in the U.S. economy.

Introduction:

In the United States we value competition in our market system. Competition is a regulating force, along with the self-interest of the consumer in the US economy. They work together to keep prices low and bring new products to the market place; they also foster innovations that help to bring down the cost of doing business. But are there times when one supplier in a market is better than a competitive market? Should the government work to protect that one supplier in a market? This lesson will explore the idea of monopolies and the actions the government uses when faced with monopolies.

Contrary to popular belief, monopolies are not illegal in the United States. What is illegal is actions taken by monopolies to limit competition. This lesson will use the railroad industry and the computer industry to show how monopolies gain their power.

Resources:

• Rise of Monopolies: This is an article discussing the rise of monopolies
  www-cs-faculty.stanford.edu/~eroberts/cs201/projects/corporate-monopolies/development.html ^[1]

• Monopoly: This site provides you with the definition of monopoly
  www.amosweb.com/cgi-bin/gls.pl?fcd=dsp&key=monopoly ^[2]

• Profit: This site provides you with the definition of profit
  www.amosweb.com/cgi-bin/gls.pl?fcd=dsp&key=profit ^[3]

• Entrepreneur: This site provides you with the definition of entrepreneur
  www.amosweb.com/cgi-bin/gls.pl?fcd=dsp&key=entrepreneurship ^[4]

• Markets: This site provides you with the definition of market
  http:///cyberteach/glossary.php#M

• Market Forms: This site provides you with an article on Market Forms
  http://simple.wikipedia.org/wiki/Market_forms ^[5]

• US v. Microsoft: Timeline: This provides an article regarding United States v. Microsoft
  www.wired.com/techbiz/it/news/2002/11/35212 ^[6]

• Interstate Commerce Act (1877): This provides you with an article on the Interstate Commerce Act
  www.usnews.com/usnews/documents/docpages/document_page49.htm ^[7]

Process:

Use the following presentation to explore the history of monopolies in the United States. Use the Web links listed above to discover information about monopolies and their role in the economy of the United States.

Monopoly Presentation

Ask the students what they discovered from the presentation and related Web links. Ask them if they think monopolies are a good thing or a bad thing. Ask them to back up their statements using information from the resources they just read.

Conclusion:

Monopolies arise when one company can dominate a market. We can find ecamples from the railroad industry in the early nineteenth century, or we can use the example of Microsoft and the computer industry in the early twenty-first century. Consumers benefit when there is competition in a market place. Monopolies sometimes limit competition and cause prices to be higher than they would be in a competitive market. Will Microsoft run into the same problems the railroad industry did? Or can Microsoft keep its status as the largest software business in the world? Only time will tell.

Assessment Activity:

1. Market:
[A mechanism that allows people to trade goods and services.]

2. Monopoly:
[A persistent market situation where there is only one provider of a product or service.]

3. Entrepreneur:
[A person who brings a new or existing product to a new or existing market.]

4. Profit:
[ The value gained from business operations.]

Using the examples of the railroad and computer industry, describe how certain companies in those industries achieved monopoly status.

Answers should follow the information in the links that describe the two industries:

For the railroads use:

www-cs-faculty.stanford.edu/~eroberts/cs201/projects/corporate-monopolies/development_rrmon.html ^[8]

For the computer industry use:

www-cs-faculty.stanford.edu/~eroberts/cs201/projects/corporate-monopolies/development_microsoft.html ^[9]

and also:
www-cs-faculty.stanford.edu/~eroberts/courses/cs181/projects/1995-96/corporate-monopolies/development_ibm.html ^[10]

What do the critics of the case United States v. Microsoft say about the governments case? Do you agree or disagree? Use facts to backup your arguments.

Answers should follow the information in the link:
www-cs-faculty.stanford.edu/~eroberts/courses/cs181/projects/1995-96/corporate-monopolies/development_ibm.html ^[10]

Extension Activity:

What is Microsoft up to now?

Have the students research the various cases against Microsoft and write an essay detailing the current state of legal action against Microsoft. The search can be local or international.

Below are a few Web links to help the students start their investigation.

www.around.com/microsoft.html ^[11]

http://news.zdnet.co.uk/software/windows/0,39020396,39116764,00.htm ^[12]

www.svextra.com/blogs/gmsv/2005/06/an_interview_wi.html ^[13]

Links Used:

1. ^{^} "Rise of Monopolies" - (www-cs-faculty.stanford.edu) This article discusses the rise of monopolies.
2. ^{^} "AmosWEB: Monopoly" - (www.amosweb.com) This site provides you with the definition of monopoly.
3. ^{^} "AmosWeb: Profit" - (www.amosweb.com) Provides a definition of profit.
4. ^{^} "AmosWeb: Entrepreneurship" - (www.amosweb.com) Provides a definition of Entrepreneurship.
5. ^{^} "Wikipedia: Market Forms" - (simple.wikipedia.org) Provides information on different types of markets.
6. ^{^} "U.S. v. Microsoft: Timeline" - (www.wired.com) This site provides key moments in the antitrust trial of U.S. v. Microsoft.
7. ^{^} "Interstate Commerce Act (1877)" - (www.usnews.com) An article providing information on the Interstate Commerce Act.
8. ^{^} "Development of the Railroad Monopoly" - (www-cs-faculty.stanford.edu) This article chronicles the development of the Railroad Monopoly.
9. ^{^} "The Making of Microsoft" - (www-cs-faculty.stanford.edu) This site explains the growth of the Microsoft monopoly.
10. ^{^ ^} "The Building of Big Blue" - (www-cs-faculty.stanford.edu) This site explains the rise of the IBM monopoly.
11. ^{^} "Making Mictrosoft Safe for Capitalism" - (www.around.com) This article provides explanations of how Microsoft gains and exercises power--controversial then--have gained mainstream acceptance.
12. ^{^} "Office 2003 will 'protect Microsoft's monopoly' - Sun" - (news.zdnet.co.uk) This site explains that Sun Microsystems has expressed concerns that document protection tools that Microsoft included in Office 2003 will fortify the software giant's domination over enterprise desktops.
13. ^{^} "An Interview With Linus Toralds" - (www.svextra.com) This interview talks about the future of proprietary software models, Microsoft, and open source software.

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