Question 1 (10 marks) Agricultural output is affected by the weather. Excessively high temperatures and a lack of rainfall are detrimental too crop yields. Of course, all farmers want the best growing conditions possible, and they work with whatever the weather is, in order to maximize their crop yield. Suppose, however, for a particular crop, this is a bad year and there is a decrease in crop yield, and therefore less of the good is produced. Is there any way this could be benecial for the framers' revenue? a) Without the use of a diagram, in your own words, layout the condition(s) under which this could happen. b) Suppose you have a bright but sceptical friend who doubts your answer in part (a). Without relying on technical jargon, explain (again, in your own words) how such a surprising result is possible. Question 2 (10 marks) Suppose the government imposes an excise tax on a luxury good (i.e. for which there is elastic demand). (a) Draw a supply-demand diagram to show the effects of this tax. The curves should reect the case where demand is more elastic than supply. Label the initial equilibrium price and quantity: Po and Q0, and the new equilibrium price and quantity: P1 and Q1. (b) On your diagram, clearly show the amount of the tax paid for by (i) the consumer, and (ii) the producer