2) Alicia owns and values a house at $215,000. Bernadette really likes this house because of the yard (where her child could play) and offers Alicia $232,000. Alicia accepts Bernadettes offer. After the signing of the contract, person Bernadettes child unexpectedly dies and she now values Alicias house at only $220,000. Bernadette now wants to back out of the contract. Transaction costs from selling any house amount to $4,000 and are borne by the seller. The transaction costs only occur if the house is actually sold - not when the contract is signed. Alicia insists that Bernadette buy the house but Bernadette ignores all calls, texts, and e-mails from Alicia and refuses to talk with her. Seeing no other option Alicia sues Bernadette for breach of contract.

a) (10 points) Suppose a judge hears the case and orders perfect expectation damages to be paid to Alicia should Bernadette continue to breach. How much would Bernadette have to pay Alicia if they choose not to purchase the house and breach?

b) (15 points) If perfect expectation damages were ordered what would Bernadette do? Suppose when Alicia accepted Bernadettes offer to purchase the house at $232,000 the next best offer at the time was an offer by Camara for $225,000. This offer is no longer available.

c) (10 points) Suppose the judge ordered opportunity cost damages to be paid, how much would Bernadette have to pay A?

d) (15 points) Suppose the judge had ordered perfect expectation damages. A few months later Delores comes along and values the house more than anyone at $222,000 and offers that amount of money for the house. Would the judge have made a better decision if they originally chose opportunity cost damages versus perfect expectation damages? Explain your answer