Economics Question help?

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Joshua Lynes

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In this situation, he should buy the house because he will lose no money in the long run whereas renting would cause a deficit of $8000 a year. The opportunity cost is the initial 200 grand spent on the house. The answer would not change if the rent was $11000 a year.
 
I need help on this Economics problem.

A millionaire rents a house for a constant $8,000 a year and keeps his millions in a money market fund that always earns 5% a year. He is given the option of buying the house for $200,000. If he buys the house, assume he can sell it anytime in the future for exactly $200,000. Should he buy the house or keep renting, and why? (Ignore taxes and maintenance costs.) What is the opportunity cost of buying the house? Would your answers to the above questions change if the rent was $11,000 a year? Please explain.

Thank you so much.
 
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