A monopoly is a business situation in which a corporation — through market power or a government-granted franchise — is either the only company conducting business in a given industry or the sole source of a specific commodity or service. A "natural monopoly" occurs in an industry where characteristics of the industry tend to result in monopolies evolving.
A good example is the electric utility industry where a proportionately large capital investment is required to produce a single unit of output and where large operators can provide goods or services at a lower average cost than can small operators. Both conditions occurred in the electric industry in the early 1900s. Thus, what began as a competitive industry quickly evolved into a market with few competitors. The resulting extreme market power of the survivors created the potential for excessive profits and unfair favoritism to certain customers. This in turn created the need for government oversight of electric services.