A natural monopoly is a type of monopoly that arises in an industry or sector with high barriers to entry and start-up costs that prevent any rivals from competing. It occurs when a single company can produce and offer to sell a product or service at a lower cost than its competitors can, resulting in practically no competition in the market. A natural monopoly has a very different cost structure. It has a high fixed cost for a product that does not depend on output, but its marginal cost of producing one more good is roughly constant and small.

Here are some key points about natural monopolies:

• A natural monopoly occurs when the most efficient number of firms in the industry is one.
• A natural monopoly will typically have very high fixed costs, meaning that it is impractical to have more than one firm producing the good.
• A natural monopoly arises due to unique circumstances where high start-up costs and significant economies of scale lead to only one firm being able to efficiently provide the service in a certain territory.
• A company with a natural monopoly might be the only provider of a product or service in an industry or geographic location.
• A natural monopoly becomes a monopoly over time due to market conditions and without any unfair business practices that might stifle competition.
• Natural monopolies are often set up by governments not to make profits but to regulate certain markets.
• Many of the largest energy companies in the world are natural monopolies in their respective markets.

Examples of natural monopolies include tap water, electricity, and gas distribution networks. Natural monopolies are often regulated by the government to prevent abuse of market power and ensure that prices are fair for consumers.