A natural monopoly can happen when there is very high barriers to entry that it is not profitable for more firms to enter the market for the level of demand that is present in the market. A natural monopoly keeps getting increasing economies of scale for the level of demand in the market, and relatively high fixed costs. The average cost of production would then keep decreasing for the whole demand of the product or service. It is thus cheaper for a single firm to produce the product or service, as it would not be profitable for two or more firms to be in the market.