Question: What is a natural monopoly and why do they exist? 

Answer: A natural monopoly is one that exists because of economies of scale rather than one created by a government to fill the need.\n\nTelephone companies, cable companies, et cetera are often local monopolies give sole license to operate within a city because the cost of deploying cables or wires to the home would be cost prohibitive for multiple companies to deploy, own and operated.\n\nMicrosoft is like a natural monopoly, despite some of their practices that some deemed anti-competitive, they have had competitors for decades.  For reasons of compatibility, operability, and cost, Microsoft became, for all intents and purposes, a monopoly because the consumers chose them by the product purchases they made.  Consumers were always free to buy an Apple computer, DR-DOS, WordPerfect, and any of countless other products.  However, they didn't because there was an economy of scale by being able to exchange Word and Excel documents, buy a computer from competing manufacturers which ran the same software, and purchase software written for Windows becuase it was too costly for the developers to write software for multiple platforms.  Thus it was "natural" rather than being given sole license by any particular governing body such as the US Government.\n\nhttp://en.wikipedia.org/wiki/Natural_monopoly
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