Ethel is trying to decide whether to have 0 cars, 1 car, or 2 cars.

Ethel is trying to decide whether to have 0 cars, 1 car, or 2 cars. If x is the number of cars she

has and y is the amount of money she has per year to spend on other stuff, Ethel's utility function

is U(x; y) where U(0; y) = (y)^1/2; U(1; y) = (15/14)y^1/2; and U(2; y) = (10/9)y^1/2. Suppose that it costs

$2000 a year to have 1 car and $4000 a year to have 2 cars. Ethel finds that the right thing to do de-

pends on her income. What is her willingness to pay for 1 car if her income is M? What is the lowest

income at which she would have a car? What is the lowest income at which she would have 2 cars?