A natural monopoly emerges out of competition among firms in an industry with extensive economies of scale; the downward-sloping segment of the LATC curve extends to or beyond the market capacity (or market demand).
Smaller firms are gradually driven out by the larger (more efficient) firms.
The surviving firm would become a (natural) monopoly.
If unchecked, a natural monopoly behaves like a monopoly; it under-produces and overcharges.
SAC 1 SAC 2 SAC 3 o Q $ D Natural Monopolies LAC Q1 Q2 Q3
SAC o Q $ D Natural Monopolies Monopoly Pricing LATC MR SMC LMC Pm Qc Qm AC p