Evaluations for input

The social cost of an action is the total cost to society. It often includes both the direct costs of providing a good or service and any externalities (positive or negative) that may arise. In this case, the good being provided is coffee.

Given that the government spends $1 per cup for 100 people, the direct cost of providing the coffee is$100 per day.

The people value the coffee at 75 cents per cup. Since utility or value is subjective and varies from person to person, in a scenario where everyone is identical (as is the case in the land of Nod), we assume each person assigns the same value to the coffee. Therefore, for 100 people, the total value they assign to the coffee is $75 (75 cents x 100 people).

However, when estimating social cost, we consider the cost of providing the service against the value it provides to recipients. Here, the government's expenditure (the actual cost) is $100, but the people value it less than that, at only$75 in total. The discrepancy does not directly factor into the calculation of social cost in conventional terms, which primarily concerns with cost to produce and externalities. Since the question does not mention any externalities (positive or negative impacts beyond the transaction between the government and the people), we would focus on the direct cost of production here.

Thus, the direct social cost of providing the coffee is the government's cost, which is $100. The consideration that people value it less doesn't technically reduce the government's expenditure or the direct cost but instead highlights a potential inefficiency or misallocation of resources where the cost exceeds the perceived value. Nonetheless, in terms of calculating a direct social cost here, it's$100 per day given the absence of mentioned externalities.

Great question! To find the social cost of providing free coffee, we need to consider the cost to the government and the value that the people in line place on the coffee.

Given:

• 100 people wait in line each day to buy peanuts.
• The government provides a free cup of coffee to each person in line.
• It costs the government $1 per cup to produce the coffee.
• The people in line value the coffee at 75 cents per cup.

Step 1: Calculate the total cost to the government for providing the free coffee. Total cost to the government = Number of people in line × Cost per cup of coffee Total cost to the government = 100 × $1 =$100

Step 2: Calculate the total value of the coffee to the people in line. Total value to the people = Number of people in line × Value per cup of coffee Total value to the people = 100 × $0.75 =$75

Step 3: Calculate the social cost by subtracting the total value to the people from the total cost to the government. Social cost = Total cost to the government - Total value to the people Social cost = $100 -$75 = $25

Therefore, the social cost of providing free coffee to the people in line is $25 per day.