Assume, for instance, that Company N manufactures a tool that can change red traffic lights to green. It has a patent on the technique, and no other businesses have been able to create products that are comparable. The "Red Light Green Light" gadget sells for $1,000, yet only costs $250 to produce (representing a 75% gross profit margin). Since only 50,000 units are produced by Company N annually, there is a huge demand for the product.
Company N is able to set the price of the item since there is no competition, and there is a high level of profit and demand. If there is continued demand for the gadget, the company can increase the price to $2,000 or even more in its capacity as a price maker.