A cell phone firm runs a campaign in which it gives away a free phone to customers who buy the most expensive data use plan. This is an instance of direct cross-subsidization. Thus, the correct answer is (c) direct cross-subsidies.
Cross subsidization is the practice of supporting one product with the earnings from another. This suggests that one set of consumers is subsidizing the consumption of another group of customers. This situation occurs when public transit rates in highly inhabited places are slightly raised to compensate for artificially low transit fares in less-populated areas where the government is attempting to stimulate the usage of public transportation. Higher rates, lower staff compensation, fewer frequencies, and older vehicles on popular services lessen the attractiveness of services and extend financial risks of unprofitable services to lucrative services, which might result in cuts to profitable services to offset expected and unforeseen losses.
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