When the demand for a good or service limits the amount that can be sold to an output at which the firm experiences economizing of scale, the firm is a natural monopoly.
A natural monopoly is a firm with such extreme economies of scale that once it starts creating a certain level of output, it can produce more at a far lower cost than any smaller competitor. Natural monopolies exist far more continually than pure monopolies, mainly because the conditions are not as stringent.
A natural monopoly is a monopoly that occurs because a single firm can supply a good or assistance to an entire market at a smaller cost than could two or more companies.
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