Policy toward monopolies depends crucially on whether or not the industry in question is a natural monopoly, one in which increasing returns to scale ensure that a bigger producer has lower average total cost. If the industry is not a natural monopoly, the best policy is to prevent a monopoly from arising or to break it up if it already exists. Government policy used to prevent or eliminate monopolies is known as antitrust policy, which we will discuss in Module 77. For now, let’s focus on the more difficult problem of dealing with a natural monopoly.