In fact they could even give them away for free. But you are then going to see a .info effect, with many domains used for nefarious purposes like spam. Or you will see a lot of MFA sites or otherwise poorly developed domains. This will reinforce the impression of a shady extension where no serious development takes place. You will have volume (in terms of registrations) but a bad perception which is bad for the long term. It's one reason why .biz/.info don't carry a lot of trust.
Somebody who cannot spend $40 or even $25 on a domain probably doesn't have a big budget for development in the first place... after all it's the price range of a .com with a retail registrar like netsol or register.com (vs the discount registrars that we domainers use).