A competitive market consists of many buyers and sellers. Markets thrive because an equilibrium price is established through natural competition and no single buyer or seller can affect that price. Instead both buyer and seller must take the price given by the market based on the dynamics of supply and demand. This competition is healthy and necessary to the economy because it regulates price, production, promotes and motivates innovation and improvement. In comparison, a monopoly dictates its price and quantity based on demand. It has the potential to influence prices and does so to increase profits. Regarding production, a monopolist produces below the demand curve in order to charge higher prices to consumers. Less production and higher prices clearly illustrate the inefficiency of a monopoly and the harm it may cause to the economy.

January 2, 1882 marked the formation of the Standard Oil Trust. It was the invention of attorney Samuel Dodd and fueled by the control of John D. Rockefeller. Rockefeller began by concentrating on the refining business. He then expanded to other aspects of the oil industry to include extraction, sales, transportation, research, marketing even to the point of barrel manufacturing. The practices that brought Standard Oil to its peak became the evidence of its demise. Rockefeller kept a low profile on his company earnings and hid the profits by reinvesting. Other acts were more covert and damaging. Standard Oil had agreements with the railroads in which the railroad provided not only a lower transportation price but also gave a Standard Oil a kickback from the higher prices charged to competitors. The railroad also provided information regarding competitors shipments. This greatly aided Standard Oil in its ability to wage lengthy price wars undercutting the competition. Prices were then raised high enough to maximize profit without attracting new competitors. Also reported were acts of sabotage and bribery. When pipelines became a threat to Standard Oil, Rockefeller bought land to intercept piping routes. Standard Oil continued its consolidation and eventually made any form of a competitive challenge impossible. In 1906, the federal government launched a lawsuit against the Standard Oil Trust based on its practices and abuses. In 1911, Standard Oil was found in violate of the Sherman Anti-Trust Act of 1890 and was soon dismantled.

The government both benefits from and allows natural monopolies to exist, in part to encourage

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