Alice hires Betty to repair her boat. The repairs to the boat are worth $9000 to Alice, and would cost Betty $4000 to complete. They agree on a price of $7000 and sign the contract. Consider the following two possible changes (each independent from the other, not happening in sequence): -- Suppose that Betty's costs increase to $8000, and she wants to breach the contract. a) Would breach be efficient (overall), and why or why not? b) What would expectation damages amount to? c) Would Betty still want to breach if she had to pay these expectation damages, and why or why not? - Suppose that Betty's costs increase to $10,000, and she wants to breach the contract. a) Would breach be efficient (overall), and why or why not? b) What would expectation damages amount to? c) Would Betty still want to breach if she had to pay these expectation damages, and why or why not?

Alice hires Betty to repair her boat. The repairs to the boat are worth $9000 to Alice, and would cost Betty $4000 to complete. They agree on a price of $7000 and sign the contract. Consider the following two possible changes (each independent from the other, not happening in sequence): -- Suppose that Betty's costs increase to $8000, and she wants to breach the contract. a) Would breach be efficient (overall), and why or why not? b) What would expectation damages amount to? c) Would Betty still want to breach if she had to pay these expectation damages, and why or why not? - Suppose that Betty's costs increase to $10,000, and she wants to breach the contract. a) Would breach be efficient (overall), and why or why not? b) What would expectation damages amount to? c) Would Betty still want to breach if she had to pay these expectation damages, and why or why not?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter7: Economies Of Scale And Scope

Section: Chapter Questions

Problem 7.5IP

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