The firm caters to the whole market, obtains economies of scale, and generates demand for the goods. Again, it mostly occurs in the airline sector, where larger airlines do not allow new small carriers to flourish. The second factor for a firm to be a monopoly is to become so large in resources, production of goods, and financially that it starts buying out its smaller competitors to eliminate any competition from the sector and keep the operating cost so low that smaller companies cannot compete in prices.
As a result, its competitors will be stifled of resources and not succeed in entering the market. This type of monopoly firm has to create an extremely high entry barrier for new rivals to keep themselves unique and insulated.Furthermore, suppose one makes a comparative study between the natural monopoly vs monopoly in that case, one finds that a monopoly does not require an extremely large scale of economies, and its profits are not limited to a single firm servicing the major market portion. Moreover, the companies functioning as monopolies must take utmost care in pursuing the most ethical business practices otherwise, they could be legally sued and pave the way for their rivals to end their monopoly.
Hence, one can find the presence of a natural monopoly in these sectors that depend on the natural resources mentioned previously. It is a rarity these days but is found in sectors dependent on natural resources like rivers, minerals, mountains, geographical locations, and physical locations. A natural monopoly becomes a monopoly because of the prevalent market conditions and not by any unfair practice.
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