Exclusive right to manufacture and sell for 17 years. A single firm can supply a good or service to the entire market at a smaller cost than two or more firms. Economies of scale over the relevant range. Controls 80% of world production of diamonds
Students sometimes have a difficult time understanding why the monopolist has to decrease price in order to sell an additional unit of output. Note that the monopolist will charge the highest price that consumers are willing to pay. When the price is say $5, all consumers willing to pay $5 or more will make a purchase, those willing to pay less than $5 will not buy at $5. In order to attract one more customer (sell one more unit), the monopolist must lower the price, but in doing so (given the “one price” assumption) he will have to charge this lower price to ALL buyers (including those who were happy paying $5). For this reason, if the monopolist wants to sell more units (to make more money) it must also make less per unit (lower price) on all units…the quantity sold increases but the per unit price must drop: the monopolist can not escape the law of demand. For this reason, the monopolist can not charge just any price he/she wants. The monopolist chooses the combination of price and quantity that maximizes profits. This explains why we do not have to pay $1,000 or $2,000 to buy Microsoft’s Windows software. Microsoft may have monopoly power but it must still abide by the law of demand… if you want to sell more units, you must lower the price on ALL units. Monopoly power allows Microsoft to choose the price and the number of units it wants to sell, but this choice must be made within the restrictions imposed by the the market (demand).
Note that total revenue is rising when marginal revenue is positive, is maximized when marginal revenue is zero, and is falling when marginal revenue is negative.