Part I A cable TV company gives current customers a year-long discount for each new customer they bring to the cable company. Jose, a current customer, gets five of his friends to sign up for cable TV service with his provider so that he can receive discounts on his cable bill. The cable TV company is using a _____ strategy to create a barrier to entry. network effect reputation and goodwill free exit switching cost

network effect

reputation and goodwill

free exit

switching cost Part II

A seller strives to achieve consistently high quality in all its output so that customers can trust that they will be pleased with the product. Building a reputation for high quality is consistent with a seller trying to _____ through _____ strategy.

proliferate brands; a supply-side

create customer lock-in; a demand-side

build a network; an entry deterrence

raise switching costs; an entrepreneurial Part IV

Juan earns a yearly salary of $120,000 in his job and $1,000 per year in interest on his savings. After he quits his job to start a company, he uses all his savings to purchase manufacturing equipment for his company. Given the above information and the data summarizing his first year in business in the table, how much accounting profit or loss does Juan earn? Table Bills paid for inputs $175,000 Revenue $300,000 $5,000 $126,000 $125,000 $4,000