Problem
Suppose a construction company is hired to create a new economics building for CSUN. Let V = $100,000; R = $5,000; P = $75,000.
1. Calculate expectation damages and reliance damages given these numbers. Suppose the builder's production costs, C, are uncertain at the time the contract is made.
2. Over what range of C is it efficient for the builder to breach?
3. Over what ranges of C will the builder actually breach under expectation damages, reliance damages, and zero damages?
4. Suppose the builder's cost of production turns out to be $125,000. Will performance occur?