Deck 14: Railroads and Economic Development

Question 1

Many railroads received government subsidies and land grants and,thus,were influenced by the government.

Answer 1

True

Question 2

Fogel's (1964)work on railroads after the Civil War shows that they did not dominate the markets?for steel,coal or wood.

Answer 2

True

Question 3

As in the modern world,price-discriminating railroad industrialists of yesteryear charged the highest prices in markets with the steepest competition.

Answer 3

False

Question 4

The Fourteenth Amendment was applied to the railroads in the Santa Clara County v Southern Pacific Railroad (1886)decision even though the original intent of that amendment had been to protect the property of former slaves.

Question 5

The U.S.federal government embraced all of the Populists' requests,including the nationalization ?of the railroad system.

Question 6

During the era from 1880 to 1920,the U.S.economy experienced a rise in big business,an expansion in industry and increased concentration in both.

Question 7

Historically,price discrimination was aggressive behavior exhibited by whom? The

A) monopolist
B) mom and pop business person
C) manager of a large group of industrial workers
D) corporation

Question 8

Modern work in economic history by people like Robert Fogel (1964)and Albert Fishlow (1965)shows

A) that railroads were the indispensable key to rapid economic growth in the 19th century.
B) that the levels of Gross National Product (GNP) reached in 1890 would have been reached?in 1880 had it not been for reckless railroad speculation.
C) that less than 5% of the country's late 19th-century economic growth was attributable to railroads.
D) none of the above.

Question 9

The growth of total railroad mileage

A) was far greater after the Civil War than before.
B) was maximized in miles built per decade before 1860.
C) was a free-market phenomenon, not subject to government subsidies.
D) was not subject to business cycle fluctuations.

Question 10

Like the contemporary forms of transportation-airplanes,automobiles and trucks-railroads shifted from being perceived as a private luxury to a public necessity.

Question 11

Martin's research (1971)supports the claim that the Interstate Commerce Commission (ICC)was?a federal regulatory agency,The ICC was designed to capture market gains for the consumers of railroad services as well as for the railroad industrialists.

Question 12

All railroads were private enterprises with no government influence.

Question 13

North (1974)finds evidence to suggest that the iron industry was equally dependent on the railroad and iron stove industries for sales revenue at one point in time.

Question 14

Railroads fueled the expansion of all markets in the post-bellum period of U.S.history.

Question 15

Railroads

A) were among the last of the pre-1890 big businesses to be regulated.
B) were only subject to regulation by governments when the federal government stepped in with?the Interstate Commerce Act of 1887.
C) were objects of regulation more than a decade before the Interstate Commerce Commission Act.
D) were never subject to government regulation before World War I and the "command economy."

Question 16

Fogel (1964)showed that railroad construction after the Civil War dominated the markets for which of the following?

A) Steel
B) Coal
C) Wood
D) None of the above

Question 17

Charging "what the traffic will bear" was a tactic commonly pursued by American railroads before they were subjected to regulation.

Question 18

The Interstate Commerce Commission (ICC)(1887-1995)was the very first attempt by Congress and/or the federal government to regulate the railroads; regulation had previously come solely from the states.

Question 19

The pure competitor usually charges higher prices and offers more output than the monopolist?or oligopolist.

Question 20

The Great Northern railroad was privately managed well by James J.Hill (1889)and never went bankrupt.

Question 21

The Granger Cases of the 1870s

A) represented farmers' overall support for changes in the railroad industry.
B) served to organize collectively and support legally the economic, political and social values?of farmers.
C) organized the collective interests of railroads in what was known as "The Grange of the Midwest."
D) are true for all of the above.

Question 22

Munn v Illinois (1877)was particularly important with regard to government regulation because it

A) upheld the traditional right of businesses to act freely without interference by government.
B) established the right of government to regulate any business that was deemed "clothed" in?the public interest.
C) established the right of government to regulate any and all businesses wherever such regulation was deemed desirable to promote competition.
D) established the right of government at any level to regulate any business activity if such regulation was deemed desirable for any reason.

Question 23

The perfectly discriminating monopolist will produce the

A) quantity at which average cost exceeds marginal revenue.
B) quantity at which marginal cost equals average cost.
C) quantity at which marginal revenue equals marginal cost.
D) quantity and price which is not necessarily profit-maximizing but in the ?best interest of society at large, even if it means loss.

Question 24

The "monopoly issue" is concerned with the fact that

A) monopolies will "charge what the traffic will bear" in order to maximize their profits.
B) monopolies will attempt to increase their profits by discriminating among their customers?and charge prices that they are willing to pay, instead of charging one price.
C) monopolies will be able to charge higher prices and earn higher rates of return than ?competitive firms.
D) all of the above apply.

Question 25

Why did railroads come under government regulation?

A) Disgruntled shippers and travelers raised an outcry about the routes of railroads.
B) Some people effectively argued that railroads were charging "unfair" rates.
C) The railroad industry was too competitive, thus driving rates below those necessary ?to ensure normal profits for railroad companies.
D) All of the above are correct.

Question 26

What were the "Anti-trust Acts"? Identify the most important factors bringing about their enactment into law.How have the anti-trust acts been used with court backing to influence behavior in the railroad industry,communications industry and labor movement?

Question 27

Today's railroads are:

A) Privately owned and regulated by competitive forces.
B) Private owned but managed by federal regulatory bodies.
C) Federally owned and managed by government regulatory bodies.
D) Federally owned but competitive.

Question 28

Changing conditions in transportation during the years following the Civil War (1861-1865)provided an economic explanation for which of the following?

A) Railroad amalgamation
B) A well founded fear of monopolies by agriculturalists
C) Large government funding budgets for railroads
D) All of the above

Question 29

Which of the following illustrates the economic inefficiencies of government regulation?

A) Railroad rate increases are set by a government agency and these increases fall below increases in repair and depreciation costs but railroad passengers are satisfied.
B) Competitive railroad rates are determined by the buying and selling actions of those in the railroad industry.
C) Rate increases set by government agencies are set to match the increases in repair costs and the acceleration in depreciated capital.
D) Government protects private and individual rights to goods, service and resources.

Question 30

Fogel's work (1964)on the economic impact of railroads is mostly written in response to

A) Rostow's takeoff theory.
B) Schumpeter's theory of railroads building ahead of demand.
C) David's theory of path dependency.
D) Engerman's theory of multiroute analysis.

Question 31

In 1906,the Hepburn Act

A) Required the federal government to set "fair rates" for customers regardless of geographical location.
B) Required the federal government to set rates that promised a positive rate of return to railroads.
C) Granted the power to set maximum rates in the railroad industry to the federal government.
D) Granted the power to set maximum rates in the railroad industry to the leading railroad tycoons.

Question 32

Describe the changing legal,business and economic climate of the post-Civil War period that led?to the federal regulation of business activity.Discuss the key court cases that sanctioned federal regulation of business.

Question 33

Some economic historians argue that the Interstate Commerce Commission (ICC)was the first case of the "capture" of a federal regulatory commission.What does this mean?

A) The railroads used the ICC to solve the problems of cartel management.
B) The users of the railroads-passengers and shippers-influenced the ICC to keep railroad rates high and the quality of those services high.
C) The railroads used the Commission to keep rates high and keep potential new railroads from entering the business.
D) Foreign investors high jacked the ICC to protect their railroad investrments.

Question 34

Regarding the Interstate Commerce Commission (ICC),

A) historians agree that it was primarily "captured" by the industry that it was supposed to regulate.
B) historians agree that it was primarily "captured" by passengers and shippers to the disadvantage of the railroads.
C) historians generally agree that it was not "captured" by any group, but rather served the ?public well.
D) historians do not "agree" on any of the above.

Question 35

The Interstate Commerce Commission (ICC)

A) was the first permanent independent federal regulatory agency.
B) was established because, given the interstate nature of railroads, the regulation the public demanded from the states simply passed to the federal government.
C) initially lacked the power to set railroad rates, but its founding marked the beginning of a kind?of federal government power capable of almost infinite expansion.
D) is best described by all of the above.

Question 36

Fogel (1964)came up with two estimates of social savings (? and ?).What do they represent?

A) The level of industrial productivity using railroads and the level not using railroads
B) The lowered benefit of transport for agricultural goods using railroads and the lowered benefit of transport for all goods and passengers using railroads
C) The lower output of the U.S. economy using transportation financed through domestic capital and foreign capital
D) The cost of shipping goods by railroads and the cost of shipping by waterways and wagon transport

Question 37

Which event in business regulatory history permitted government intervention in industry affairs?

A) The case of Munn v Illinois (1877)
B) The Sherman Act of 1890
C) The case of Nebbia v New York (1934)
D) The creation of the Interstate Commerce Commission via the ?Interstate Commerce Act of 1887

Question 38

In 1886,what did the U.S.Supreme Court rule in Wabash,St.Louis,and Pacific Railway v Illinois?

A) Only the federal government could regulate commerce across states.
B) Only the states had the right to regulate commerce across states.
C) Neither the federal or state governments had the right to regulate across states.
D) Railroads were not subject to any government regulation, state or federal.

Question 39

The Granger Cases of the 1870s

A) sealed the fate of the U.S. railroad system, even though the cases were covered under a case involving a grain elevator.
B) came before the U.S. Supreme Court because state legislatures had passed laws in the 1870s to allow state agencies to control various aspects of railroad operation, including rate setting; these laws were then challenged by railroad companies.
C) established the principle that railroads were unquestionably subject to permanent regulation.
D) are true for all of the above.

Question 40

What particular complaints developed against the railroads,and by whom,that eventually led to ?their regulation by government? Though there is considerable uncertainty involved,what may ?have been some of the effects of this regulation?

Question 41

Explain why profits and a positive rate of return on investment matter in any industry.Explain how they provide industrialists with the incentive to provide the services most valued by their customers.Illustrate using the experiences of the railroad industrialists.

Question 42

Discuss the historical significance of the Granger Cases in the 1870s.

Question 43

Many individuals blame government regulation for the demise of the railroad industry.Describe their economic reasoning.

Question 44

Describe the impact of populist agitation and of rural anti-big business,anti-eastern establishment attitudes on government policies in agriculture,banking and industry in the period between the ?Civil War and World War I.In what areas did this public pressure make the most difference in ?U.S.economic development?

Question 45

How was the history of the railroad influenced by private ownership? Government regulation? How did (i)unfettered capitalism and (ii)government regulation influence the rise and fall of the railroad industry?

Question 46

Some researchers argue that the railroad industry was the first industry captured by special interest groups.Identify how and why railroad industrialists as well as customers would want to do so.What are the economic consequences?

Question 47

What is the Sherman Anti-trust Act of 1890? What is the economic history behind this act? How is this act applied today?

Question 48

What influenced and supported the shift in legal opinion and tradition that changed private property from being protected from government interference early in American history to being more heavily regulated later on? Discuss both agriculture and the railroad industry,and briefly mention the effects of these changes on American economic growth.

Question 49

What is a monopoly? Why did some individuals strongly believe that the railroad industrialists possessed monopoly power? Were their beliefs substantiated? What actions were taken against?the railroads? How do these actions affect us today?

Question 50

Incentives matter.Identify the main special interest group behind the Sherman Anti-trust Act of 1890 and identify why they wanted to pass this act.