Natural Monopoly

A natural monopoly occurs when a single company can supply a particular good or service more efficiently and at a lower cost than multiple competing firms, due to the high fixed costs and infrastructure involved. For example, utility companies like water or electricity providers often become natural monopolies because building duplicate systems would be inefficient and cost-prohibitive. To prevent waste and ensure reliable service, these monopolies are usually regulated by the government, which oversees pricing and service standards. This scenario exists because economies of scale make it impractical for multiple companies to compete in the same market.