Natural monopoly

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In economics, a natural monopoly is a company that becomes the only supplier of a product or service because the nature of that product or service makes a single supplier more efficient than competing ones. In particular, companies that grow to take advantage of economies of scale often run into problems of bureaucracy; these factors interact to produce an "ideal" size for a company. If that ideal size can supply the whole market, then that market is a natural monopoly.

Some also use the term for suppliers in a market for which entry into the market is extremely expensive. For example, early railroad and telephone companies rarely had to worry about competitors because they would have to duplicate large amounts of track or wiring that the earlier company had already paid for. In this case, the monopolies can be eliminated either by new technologies like the automobile and wireless communications, or by government intervention.

See also currency and standardization.


Other market forms