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.
- 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.
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.
Monopoly Presentation: This EconEdLink presentation introduces the idea of monopolies to students.
Rise of Monopolies: This is an article discussing the rise of monopolies.
Monopoly: This site provides you with the definition of monopoly.
Profit: This site provides you with the definition of profit.
Entrepreneur: This site provides you with the definition of entrepreneur.
Markets: This site provides you with the definition of markets.
Market Structure: This site provides you with an article on Market Structure.
Market Structure Definition
US v. Microsoft: Timeline: This provides an article regarding United States v. Microsoft.
Interstate Commerce Act (1877): This provides you with an article on the Interstate Commerce Act.
Development of the Railroad Monopoly: This site discusses the railroad monopoly that found its origins in the early 19th century.
The Making of Microsoft: This Stanford site discusses the development of the Microsoft monopoly.
The Building of Big Blue: This Stanford site discusses the development of the IBM monopoly.
Making Microsoft Safe for Capitalism: This site discusses action being taken against Microsoft and their monopoly.
Office 2003 Will Protect Microsoft's Monopoly: This 2003 article discusses concerns that many had about Microsoft promoting its own monopoly.
An Interview with Linus Torvalds: This 2005 interview discussed many aspects of Microsoft's computer industry monopoly.
Use the Monopoly Presentation to explore the history of monopolies in the United States. Next, use the Web links listed below to discover information about monopolies and their role in the economy of the United States.
- Rise of Monopolies
- Monopoly Definition
- Profit Definition
- Entrepreneurship Definition
- Markets Definition
- Market Structure Definition
- U.S. v. Microsoft: Timeline
- Interstate Commerce Act (1887)
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.
What is your definition of market? [A market is a mechanism that allows people to trade goods and services.]
What is your definition of monopoly? [A monopoly is a persistent market situation where there is only one provider of a product or service.]
What is your definition of entrepreneur? [An entrepreneur is a person who brings a new or existing product to a new or existing market.]
- What is your definition of profit? [Profit is 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:
The Development of the Railroad Monopoly
The Making of Microsoft
The Building of Big Blue
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.
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.
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.
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