Question

Why are governments considered a natural monopoly?

Answer 1

Theoretically, the government acts to amend market failures, that is, where there is no market or where it would be less inefficient in the hands of the private sector.

Thus, the government supposedly justifies its sole presence in some economic sectors under the claim that there would be way too high fixed costs for the private sector to enter it or no interest at all for the private sector.

This leads us to the discussion of public goods, which are those allegedly of government's responsibility.