In a natural monopoly, why might a firm set prices below average total costs?

In a natural monopoly, a single firm often provides a product or service more efficiently than multiple firms could, usually due to high fixed costs and low marginal costs. Sometimes, this firm might set prices below average total costs to attract more customers and increase its market share. By doing this, the firm hopes to cover its fixed costs over time through higher sales volumes, even if it incurs losses in the short run. For example, a local utility company might charge lower rates for electricity to encourage more people to connect to the service, believing that as more customers sign up, it will eventually become profitable. This strategy can help stabilize the market and ensure that the service is available to as many people as possible.