Healthy Way is a company designing healthy gourmet meals that will be delivered to its consumers. There are a total of 100 consumers in its market. Market research has revealed that the consumers are of 3 types when it comes to their tastes for the cuisine type of the meals offered by Healthy Way.

(i) 1/3 of its consumers want a completely traditional cuisine

(ii) 1/3 of its consumers want a completely modern cuisine

(iii) 1/3 of its consumers want an equal mix of traditional and modern cuisine.

Suppose consumers are happy to pay $10 a meal for their most preferred style of cuisine and experience a cost or disutility of $5 per unit distance between the meals style and their most preferred style of cuisine. Suppose it costs $2.50 to make each meal.

(a) Show, in a graph, how you would represent the consumers tastes for the different styles of cuisine for Healthy Ways meals

(b) If Healthy Way had to pick one style for its meals and wanted to sell to all 100 consumers, what style would it want to pick and what price is optimal? How much profit does it make?

(c) If Healthy Way decides to offer a product line of two styles. It still wants to sell to all 100 consumers. What two styles should it pick and what common price could it charge for the two styles? What is its profit?

(d) Comparing your answers in (c) and (d) to (b) above, explain why it is possible for Healthy Way to make more profit from offering the two varieties compared to one.

(e) Would Healthy Way make more profit if it offered more than two styles? Show if it can or cannot. Provide some factors that could limit the number of versions a company might like to offer consumers in its product line.