Why does our government permit the creation of some monopolies, but not others?

First is because of the existence of natural monopolies. Some industries require high infrastructural cost and the minimum efficient scale only allows the existence of one or two providers, hence the name natural monopolies. The government would not prohibit but instead, will try to regulate natural monopolies.

Furthermore, certain monopolies are inherently not bad rather they are the most efficient of all the market structures when it comes to production and operations. Monopolists have better control over the market. The government allows the creation of monopolies in certain strategic sectors where the free market competition may lead to dirty competition, duplication and wastage of essential resources leading to undesirable social outcomes.

The strategic sectors include:

1. Electricity Supply
2. Water supply
3. Railways
4. Road Constructions
5. Postal Services
6. Legal and law sector
7. Defense Sector