Where and how to initialize MockWebServer using Junit4 and espresso the latest version

I went through a couple of posts on stackoverflow and also some blogs that describe what happens with ActivityTestRule and some basics about Instrumentation testing in android.But i am getting confused the more i read.

I have managed to write a test case but the issue I have is that I am not able to decide where to initialize MockWebServer and how to stop the webservice call (original) from happening. I read about Dagger but i do not know if i require it.

My activity class code of what i want to test is as under:

Call<List<Repository>> call = null;
call = new RestClient().getApiService().getRepositories();

And RestClient looks as under:

public class RestClient {
public static String BASE_URL = "https://api.github.com/";
private ApiService mApiService;

/**
 * Initializes Retrofit and sets the base point of connection
 */
public RestClient() {
    Retrofit retrofit = new Retrofit.Builder()
            .baseUrl(BASE_URL)
            .addConverterFactory(GsonConverterFactory.create())
            .build();
    mApiService = retrofit.create(ApiService.class);
    }

    /**
     * returns the instance of ApiService needed to make service calls
     * @return
     */
    public ApiService getApiService() {
        return mApiService;
    }
}

And ApiService as under:

public interface ApiService {
    @GET("repositories")
    Call<List<Repository>> getRepositories();
}

My InstrumentationTestClass looks as under:

@Rule
public ActivityTestRule<MainActivity> mActivityRule =
        new ActivityTestRule<>(MainActivity.class, false, false);


@Before
public void setUp() throws Exception{
    super.setUp();

    mockWebServer = new MockWebServer();
    mockWebServer.start();

    injectInstrumentation(InstrumentationRegistry.getInstrumentation());

    RestClient.BASE_URL = mockWebServer.url("/").toString();
}



@Test
@LargeTest
public void testDataLoaded() throws IOException {
    String link = "<http://ift.tt/21LzYNZ;; rel=\"next\"," +
            "<http://ift.tt/1REPThH;; rel=\"previous\"";

    String fileName = "repositories.json";
    MockResponse mockResponse = new MockResponse();

    mockResponse.setHeader("Link", link);

    mockWebServer.enqueue(mockResponse
            .setResponseCode(200)
            .setBody(RestClientTestHelper.getStringFromFile(getInstrumentation().getContext(), fileName)));

    Intent intent = new Intent();
    mActivityRule.launchActivity(intent);

    assertNotNull(mockResponse.getBody());
}

Some questions and summary of what I have done:

1. How do i prevent the actual network call from taking place and simply make use of mockWebServer to pick records from the json file in the assets folder?
2. I tried initializing mockwebserver in the method beforeActivityLaunched but then tearDown returns with null pointer.
3. I tried initializing mockwebserver in the testFragmentLoaded method and then launched the activity using intent but then it doesnot seem to prevent the web call
4. Is what i am doing the right way? As i am new to automation testing :(

Please assist.