A recent news report suggests that 30 firms that grow and export walnuts decide to form a cartel that aims to raise the price of walnuts and reduce output to increase profit. What can be predicted about the future of this cartel

This statement is incorrect because 30 firms is a considerable number for forming a cartel. While more firms can complicate management, the issue here is not the low number but rather the challenges in coordination and the existence of substitutes that undermine cartel effectiveness.

While it's true that domestic agreements can be enforceable, the success of the cartel hinges on its ability to reduce output and control prices. The limited geographic production does not guarantee success, especially when substitutes are available, which can lead consumers to switch away from walnuts if prices rise.

This statement is inaccurate because if demand for walnuts were highly elastic, any price increase by the cartel would significantly decrease the quantity demanded. Therefore, rather than being successful, the cartel would likely face substantial challenges in maintaining higher prices without losing customers to substitutes.