Suppose a cartel is formed by the tomato farmers.Which of the following would increase the ability of this cartel to set output and prices in the domestic market?

Question

Quizplus · Accepted Answer

With highly inelastic demand for tomatoes, consumers will continue to purchase tomatoes regardless of price changes, giving the cartel more power to raise prices. Acreage restrictions by the government or a high import tariff on tomatoes may limit the supply, but a high supply elasticity for other tomato farmers means that they can increase their output in response to higher prices, undermining the cartel's ability to set prices.

Suppose a Cartel Is Formed by the Tomato Farmers