Which of the following best explains why Standard Oil was considered a horizontal integration monopoly?

• A. It diversified into unrelated industries to reduce risk.
• B. It acquired competing oil refineries to control a large share of the oil market.
• C. It set government regulations to limit competition in the oil industry.
• D. It owned every stage of the oil production process, from extraction to distribution.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of horizontal integration. Horizontal integration occurs when a company acquires or merges with other companies that operate at the same stage of the production process, typically competitors in the same industry.
2. Step 2: Recognize that a horizontal integration monopoly aims to increase market share by controlling many firms that produce similar products or services, thereby reducing competition within that market.
3. Step 3: Analyze the options given: Diversifying into unrelated industries is an example of diversification, not horizontal integration; setting government regulations is not a direct action by a company; owning every stage of production is vertical integration.
4. Step 4: Identify that acquiring competing oil refineries means Standard Oil was buying out other companies that operated in the same stage of oil refining, which is a classic example of horizontal integration.
5. Step 5: Conclude that Standard Oil's strategy of acquiring competing refineries to control a large share of the oil market best fits the definition of a horizontal integration monopoly.