A monopoly describes a situation where all (or most) sales in a market are undertaken by a single firm. A natural monopoly by contrast is a condition on the cost-technology of an industry whereby it is most efficient (involving the lowest long-run average cost) for production to be concentrated in a single firm. In some cases, this gives the largest supplier in an industry, often the first supplier in a market, an overwhelming cost advantage over other actual and potential competitors. This tends to be the case in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market, and hence high barriers to entry; examples include public utilities such as water services and electricity.
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Famous quotes containing the words natural and/or monopoly:
“Every natural fact is a symbol of some spiritual fact. Every appearance in nature corresponds to some state of the mind, and that state of the mind can only be described by presenting that natural appearance as its picture.”
—Ralph Waldo Emerson (1803–1882)
“Unless you become more watchful in your states and check the spirit of monopoly and thirst for exclusive privileges you will in the end find that ... the control over your dearest interests has passed into the hands of these corporations.”
—Andrew Jackson (1767–1845)