Clear Calls Inc

question 106

Multiple Choice

Clear Calls Inc.,a telephone service provider,has a large user base mainly because phone calls and messages between all Clear Calls users are free.When a person switches to a Clear Calls network,his or her entire network of family and friends is likely to switch to the same network to avail the benefit of free calls and messages.In addition,an existing user who gets a new user to register with Clear Calls Inc.is given a free wireless connection.This has helped to keep competition away from Clear Calls.In this scenario,which of the following factors is acting as an entry barrier for Clear Calls Inc.?

• A) economies of scale
• B) high capital requirement
• C) network effects
• D) high fixed costs

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Definitions:

Economic Analysis

The systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving a specific objective.

Poverty

The state of being extremely poor, where individuals or communities lack the financial resources to meet basic living needs.

Marginal Cost

The price of generating one more unit of a product or service.

Economic Loss

The difference between what is actually earned and what could have been earned in the best alternative scenario.