Facebook is a social networking Web site that is used by a growing number of individuals. Because of its popularity, it is now more difficult for new networking websites to enter and compete with Facebook. Facebook enjoys ________ as a barrier for others to enter the market.
A) a network externality
B) price discrimination
C) a negative externality
D) economies of scale

Question

Quizplus · Accepted Answer

A network externality occurs when the value of a product or service increases as more people use it. This is the case with social networking websites like Facebook. The more people that use Facebook, the more valuable it becomes as a platform for connecting with others. This creates a barrier for other networking websites to enter and compete with Facebook, as they cannot initially offer the same network externality that Facebook has.

Facebook Is a Social Networking Web Site That Is Used