Question

Respond to the following based on your reading. During the Gilded Age, business leaders pushed to force out of business or buy out competitors within their industries. Gaining a majority control of an industry proved to be very profitable for tycoons because they were able to set prices for the goods and services they provided. Collections of businesses owned by the same person or group of people became known as trusts. A business that controls an entire industry is known as a monopoly. Why might a monopoly or a trust in a certain industry be bad for both consumers and workers?

Answer 1

Answer

• A monopoly can raise prices indefinitely because of lack of competition.

• When monopolies are owned by for-profit organizations, prices become significantly high

Explanation

A monopoly is the main provider of goods and services to consumers thus they have no competition and no price restrictions. When they are not monitored and unregulated, they could adversely affect businesses, customers and the entire economy. A monopoly can set a price that remains the market price and the demand is always the market demand. When prices are high, users are not able to substitute the goods and services with an affordable alternative. In addition to that, a monopoly can shut down a business when it refuses to sell an important good to that company.

Answer 2

Skilled workers in such an industry have to work for the trust/monopoly or not work in their skill set. This gives the employer much leverage in pay/benefit negotiations.

Since consumers have no choice but to buy from the trust/monopoly they have to pay (usually) higher prices than they would if there were competition between businesses owned by different people.

Without competition there might be little incentive to improve product quality and to develop new products.