Definition, Meaning & Synonyms

natural-monopoly

noun

/ˈnætʃərəl ˈmɒnəˌpoʊli/

Definition

A natural monopoly occurs when a single company can supply a good or service to an entire market at a lower cost than two or more competing firms.

Examples

In the utility sector, water and electricity providers are often considered natural monopolies due to the high costs associated with infrastructure development.
The government may regulate natural monopolies to prevent them from abusing their market power.

Meaning

Natural monopolies often arise in industries where the infrastructure costs are high and the marginal cost of producing additional units is low, making it inefficient for multiple firms to compete.