What is a natural oligopoly? How does it arise? Give an example

What will be an ideal response?

A natural oligopoly is an industry in which a small number of large firms can supply the entire market at a lower price than could a larger number of smaller firms. Natural oligopoly arises when economies of scale and limited market demand create natural barriers to entry. For example, suppose the minimum efficient scale for a taxi company is 30 rides per day and the ATC at this level of output is $10 per ride. If the quantity of taxi rides demanded at $10 is 60 rides per day, there is only room in the market for two taxi companies. With more taxi companies, either the price would have to fall below $10 per ride or the ATC would have to rise above $10 per ride. In both cases the firms would incur an economic loss and would exit until only two firms are left.