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A cross subsidy exists when a consumer category is charged

  • A.the same rate as every other category
  • B.the average cost of supply exactly
  • C.a tariff fixed by the central government
  • D.away from the cost of serving it

Answer: D

Correct answer: away from the cost of serving it

A cross subsidy exists whenever a category is charged materially above or below what it costs to serve, so that one category pays part of another’s cost. Industrial and commercial consumers typically pay above cost and agricultural and small domestic consumers below it, and the reduction of these gaps is a standing objective of tariff regulation.

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