When a single firm can supply the entire market at a lower cost than two or more firms, it is a natural monopoly.
A natural monopoly is a monopoly in an industry where high infrastructure costs and other entry obstacles in relation to the size of the market provide the largest supplier. It is possible for one firm to serve a given market more affordably than any combination of two or more firms in that market.
A natural monopoly has a high fixed cost for an output-independent good, but its marginal cost of producing one additional good is relatively low and constant. The widespread consensus is that natural monopolies arise for two reasons: economies of scale and economies of scale
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