4 ECON History - Ch. 17 Reunification Era - The Rise of Big Business

4 ECON History - Ch. 17 Reunification Era - The Rise of Big Business

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Also, better systems of communication allowed for broader marketing. Often generates economies of scale However this strategy will only yield profits if firms can sell the large Q. “Multi-firm monopolies” Via trusts, holding costs, or buyouts P and LRAC ↑ => losses 71-72: US oil refining capacity was more than double market D. Excess capacity P was surprisingly stable; ↓LRAC was primary source of profits l become 34 separate firms, each with its own board of directors l of these were mass production industries by late-1800s Cigarettes and cigars zes societal welfare because all units for which MB > MC are produced Reunification Era: The Rise of Big Business (Chap 17) o 1890 US Census: 1 st Census to report $ value of manuf output > $ value of agric output o 17.1 – labor ↑ multiple of 5 (significant growth in labor force) 17.2 – productivity in manufacturing multiplies; large output growth Productivity growth is evident in (almost) all listed sectors, but it was most pronounced in manufacturing iron, steel, and RR freights hauling Value added (VA) per worker rising (Table 17.5, including footnote) o VA measures the total value of output minus material costs; therefore, valued added per worker reflects both labor and capital productivity VA = price – marginal cost o Note particularly the productivity growth in men’s clothing, boots/shoes, and iron/steel 1. Standardized methods of mass production and mechanization 2. Bessemer method vs. Open hearth method 3. Total value output – material costs By 1900, US is world leader in output of manufactured goods. Germany produces 50% less than the US Germany is #2 in the world in 1990 By 1915, o US producing 1/3 of world's manufacturing output o Manufacturing is the primary source of income in US o Again, note the rapid transition of the US from agriculture-dominated to manufacturing-dominated economy . II. Top Ten Industries by VA (Table 17.3) Compare “All Manufacturing” figures for 1860 and 1910; note magnitude of VA by manufacturing o Machinery to produce factory…? o Some goods are not on the list in 1910 o Turning cotton into clothes o Cotton was #1 manufactured good Changes between 1860 and 1910 reflect the transformation of US economy reflect: o Income elasticity o Technological change o Societal change
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III. Growth fueled by changes in: (p. 300-307; Econ Insight 17.1) o Allowed for mass production of manufactured goods Standardized interchange continuous flow of operation Continuous flow production – materials move steadily through the factory where they are steadily transformed
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This note was uploaded on 09/21/2011 for the course ECON 2200 taught by Professor Moore during the Spring '07 term at University of Georgia Athens.

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4 ECON History - Ch. 17 Reunification Era - The Rise of Big Business

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