A monopoly refers to a market structure where a single seller or producer has exclusive control over a product or service, allowing them to set prices without competition. This situation can arise in various industries but often leads to market inefficiencies, higher prices, and reduced consumer choice.
On the other hand, a natural monopoly occurs in industries where the costs of production are more efficiently borne by one large producer rather than multiple smaller competitors. This typically happens in sectors that require substantial capital investment and infrastructure—like utilities (water, electricity, etc.). In these cases, having multiple firms would lead to redundant infrastructures and higher overall costs for consumers.
In summary, while all natural monopolies are monopolies, not all monopolies are natural monopolies. A natural monopoly is a specific type of monopoly that arises from the unique economic characteristics of certain industries.