The defined concept of a monopoly causes many students of economics to assume that any company that engages in monopolistic practices is automatically illegal, according to the Sherman Anti-Trust Act of the United States. A monopoly simply stated is an economic entity that completely dominates one facet of industry or one service industry. It alone sets the price of the good or service it is selling, because it has no competition, in contrast to the perfect competition of a competitive marketplace or even the limited competition of an oligopolistic marketplace. But occasionally the United States government allows certain organizations to behave as corporate monopolies for the public good, such as electrical power. 1.

             The reason electrical power companies are one a such a market situation where monopolies are allowed, in fact encouraged (as these utility monopolies are not generated by economic accident) is that for both technical and social reasons there cannot be more than one efficient provider of electrical service. This is why power companies are usually considered to be natural monopolies.2 The concept of a natural monopoly and the lack of efficiency generated by the concept of electrical power and other utility markets thus has always created a dilemma for the theories neoclassical economics and market economists. Such economists usually assume that the classical laws of supply and demand should hold sway over any economy, come what may, regardless of the good or service. The laws of supply and demand hold that as price increases, so should the supply.3 .

             But with goods and services that tend to be classified as natural monopolies, such as the electric company there is one indivisible and often high cost for the provider or corporation. Then, once this start-up cost is paid, the firm can produce an unlimited amount at a constant marginal cost.