Question 1 [25 marks] On June 28th 2021, a federal judge dismissed two antitrust cases against Facebook. Judge James Boasberg threw out one of the cases, brought by 46 states, on a technicality. The complaint, which accused Facebook of acquiring nascent rivals, such as Instagram in 2012 and WhatsApp in 2014, to cement its social-networking dominance, was deemed too tardy. More profoundly, the judge found the second case, lodged by the Federal Trade Commission (FTC), 'legally insufficient". The FTC asserted that Facebook has a "dominant share of the market (in excess of 60%)", but it did not explain what that market is. And it defined "personal social networking" narrowly, excluding things like professional networks (LinkedIn) or video- sharing sites (YouTube). "It is almost as if the agency expects the Court to simply nod to the conventional wisdom that Facebook is a monopolist [in social-networking]," the judge wrote, although he conceded that Facebook has market power ("no one who hears the title of the 2010 film 'The Social Network' wonders which company it is about"). To give the FTC its due, delineating digital markets is devilishly tricky. Most social-media firms do not charge users, so the typical approach of looking at an industry's consumer- derived sales is no use. Facebook does have paying customers, firms that buy ads on its platforms, but the extent of that market, too, is hazy. If all American online advertising counts, its share is 25%, according to an estimate by The Economist. Looking just at social-media advertising it does rise to 60% in America (though globally Facebook's share is declining). But what qualifies as social media is arnorphous, as features and rivals pop up and fizzle. Source: https://www.economist.com/business/2021/07/03/is-facebook-a-monopolist 1 . 1 What are the sources of Facebook's market power? If a firm would like to enter the social networking market, what barriers to entry it may face? (13 marks) 1.2 With reference to the characteristics that determine a market structure, in your opinion, is Facebook a monopolist? (12 marks)