What causes an increase in dropped packets for a GRE tunnel when the DF bit is set?

When the Don't Fragment (DF) bit is set in a GRE tunnel, it indicates that the packet should not be fragmented during transmission. If the GRE tunnel has a lower Maximum Transmission Unit (MTU) than the physical interface, this can lead to packets being larger than the allowable size for the GRE tunnel.

When packets that are too large attempt to traverse the tunnel without the ability to fragment, they are dropped because the network devices cannot break them down into smaller packets for transmission. Consequently, this results in an increase in dropped packets. The DF bit prevents fragmentation, so if the tunnel's MTU is lower than the size of the packet being sent, the packet will not be forwarded, leading to loss.

This situation emphasizes the importance of ensuring that the MTU settings for GRE tunnels are correctly configured to prevent packet loss. In contrast, the other choices do not accurately address the relationship between MTU settings and the DF bit in GRE tunnels, leading to a misunderstanding of how packets are handled in such configurations.