Cadondon, Randell L.

I-B BSFM Micro Econ

Reflection Paper:
Monopoly and Electricity
Directions: Submission of a weekly reflection on the module discussed for the
week and application of personal insights on the article below – Is MERALCO
really a monopoly? How else do you think the government can dilute
MERALCO’s market influence?

Monopoly is a situation where there is a single seller in the market. In

conventional economic analysis, the monopoly case is taken as the polar
opposite of perfect competition. By definition, the demand curve facing
the monopolist is the industry demand curve which is downward sloping.
Pure monopoly is a market controlled by one seller with a good or service
that hads no close substitutes. Natural Monopolies are special situations
where it is more cost effective to have one large producer rather than
several smaller competing firms. Examples are public utilities. The
monopoly can still raise prices and abuse its power, so the government
often regulates prices and fees.

So is MERALCO really a Monopoly? Yes because it hads no competition

within its franchise/service area. it is illegal for anyone other than Meralco
to distribute electricity within the covered area. Thus, Meralco is
considered a limited monopoly (limited within its franchise area) by virtue
of its congressional franchise. But unlike real monopolies, it cannot
increase the price of its product/service (i.e., power distribution) without
the approval of government regulators.

The government can dilute MERALCO's market influence by finding a

substitute to the way we get electricity. The government can build or
promote the use of sustainable and renewable energy towards the
market. Renewable energy is energy that comes from source that won't
run out. Unlike MERALCO's suppliers that utilizes coal-fired power plant
in Mauban, Quezon.