A type of monopoly that exists as a result of the high fixed or start-up costs of operating a business in a particular industry. Because it is economically sensible to have certain natural monopolies, governments often regulate those in operation, ensuring that consumers get a fair deal. The utilities industry is a good example of a natural monopoly. The costs of establishing a means to produce power and supply it to each household can be very large. This capital cost is a strong deterrent for possible competitors. Additionally, society can benefit from having natural monopolies because having multiple firms operating in such an industry is economically inefficient.
[Source:
http://www.investopedia.com/terms/n/natural_monopoly.asp]
Sayed Farrukh Ahmed
Assistant Professor
Faculty of Business & Economics
Daffodil International University
