Bob Johnson decided to purchase a new home. After looking at tracts of new homes, he decided .that a custom-built home was preferable. He hired an architect to prepare the drawings. In due time, the architect completed the drawings and submitted them. Bob liked the plans; he was less pleased that he had to pay the architect a fee of $4000 to design the house. Bob asked a building contractor to provide a bid to construct the home on a lot Bob already owned. While the contractor was working to assemble the bid, Bob came across a book of standard house plans. In the book was a home that he and his wife liked better than the one designed for them by the architect. Bob paid $75 and obtained a complete set of plans for this other house. Bob then asked the contractor to provide a bid to construct this "stock plan" home. In this way Bob felt he could compare the costs and make a decision. The building contractor submitted the following bids:
Custom-designed home............$128,000
Stock-plan home.....................128, 500
Bob w(s willing to pay the extra $500 for it. Bob's wife, however, felt they should go ahead with the custom-designed home, for, as she put it, "We can't afford to throwaway a set of plans that cost $4000." Bob agreed, but he disliked the thought of building a home that is less desirable than the stock plan home. Then he asked your advice. Which house would you advise him to build? Explain.