Natural monopoly

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There are some markets that are characterized by high barriers to entry. This means it is extremely expensive for a new firm to enter the market. At a same time, it is possible to get large economies of scale: This means it is much cheaper to "produce" large quantities. The consequence of this is that it usually makes sense to have only one company in the market; one "seller", in other words, a monopoly.

Very often, this is the case of companies that produce goods of public utility, or that have to build large networks to distribute these goods. Examples would be companies that supply water, or electricity.

This market form is different from cartels, and from monopolies.