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Small businesses have fewer production costs than large ones. This is because they employ cheap labor besides using low-level technology. The output cost depends on the input cost. The lower the input cost, the cheaper the product and vice versa. These kinds of businesses, therefore, can make more sales and end up making high profits.

The profit made is the main source of capital that they use to expand their business. They develop gradually up to the level of already existing companies.

They help eliminate monopolies and even risk the existence of those corporations. For instance, the emerging car processing industries in Japan and China eliminated the monopoly of American Motors.

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