Natural monopoly

Answer 1

A natural monopoly is a type of monopoly that occurs when one company can provide goods or services at a lower cost than any potential competitor, thus driving competition out of the market. This can happen due to various factors, such as economies of scale, where the average cost of production decreases as the company produces more units. Natural monopolies often arise in industries that require significant infrastructure investments, such as utilities like water, gas, and electricity, or telecommunications and transportation. Since the fixed costs of building and maintaining the infrastructure are high, it becomes inefficient and financially unviable for multiple companies to duplicate the infrastructure and compete in the market. Consequently, a natural monopoly is usually regulated by the government to ensure fair prices and access to the essential goods or services provided.