ECON 2200 Lecture 4: ECON 2200 lecture 4
ECON 2200
Lecture 4
• Legal environment
o Limited liability - accepted in most states by 1860
1. Help growth of “big business”
2. Gave more security to businesses
o Easier process for incorporation
1. Turned from a legislative process to an administrative
process to incorporate you business
Originally, corporate charters were granted by
legislature in most states. By late 19th century, this
changed. Corporations were started through
government office and staff – rather than through
voting of government elected officals.
o Limited oversight by fed government
• Economies of scale
o specialization & division of labor
o mass production
C. As firms grew & markets expanded...
• Firms increasingly aware of competition
• Increasing incentive to protect markets/gain monopoly power
o Esp. for firms with high fixed costs
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