Answer
a) One argument for giving cash is that the needy know better than the government what the needy need, and cash helps in getting those goods and/or services.
b) The soup kitchen might be better than the cash handout (with asymmetric information) since those needing food would be easily able to get the food (if they are truly hungry). Also, this limits how much cash goes to waste for non-essential items.
Work Step by Step
c) The soup kitchen might be better than the cash handout (with behavioral economics) since the government knows people are overconfident and impulsive (and might spend the money on other items not needed for life, such as tattoos).
