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outline2 - C The business cycle 2 1 Expansion and...

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POLITICAL SCIENCE 149: TOPIC 2/LECTURE 1 (OUTLINE #2) Mass Markets, Industrial Concentration and the Penetration of A Island Communities @ I. The rise of mass markets. A. The importance of the railroads to integrating America's A island communities @ . B. The breakdown of de facto protectionism and the intensification of competition. C. Lower costs, lower prices, and the stimulation of consumer demand. II. Problems and pathologies of an unregulated market. A. Cutthroat competition: 1. Illustration : Rate wars and the dynamics of railroad competition. a. Overbuilding and the intensification of competition at the terminal points. 1) The railroad response: a) Personal discrimination : preferential rates to large shippers. b) Place discrimination : the long-haul short-haul problem. c) Pooling freight or revenue. B. Predatory competition 1. Strategy of temporarily lowering prices below the cost of production to dominate market. a. Drive out existing competitors b. Scare off new potential competitors
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Unformatted text preview: C. The business cycle 2 1. Expansion and contraction; A boom and bust @ a. Boom: increased demand C > increased prices C > increased production b. Bust: overcapacity C > price decline C > wage cuts C > unemployment C > business failure III. Business responses to the mass market and the intensification of market competition: A. The emergence of big business 1. Economies of scale a. Cost of production per unit decreases as the scale or size of operations increases. 2. Vertical integration and business concentration 1. Buying out facilities forward and backward long a chain of production. a. Standard Oil 3. Horizontal integration and business concentration a. Coordinated activity by rivals in competing industry to stabilize prices, output, and market share 1. The cartel (loosest form of combination) 2. The A trust @ (tighter) 3. The acquisition (tightest) IV. The challenge to the Jeffersonian republican ideal....
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