Question 1 – 30 points. Assume you get a job working as an employee wellness coordinator. With your
economics training, you decide to try and achieve employee health goals by offering an incentives
package.
(if you are unclear about any of this there is a background story here
http://www.npr.org/sections/health-shots/2015/05/29/410334545/when-are-employee-wellnessincentives-no-longer-voluntary -- but this article is only for background information, it is not required
reading)
You decide to focus on smoking cessation and prevention. You launch a program with a $10,000 initial
advertising campaign to provide $2,000 to any employee that takes a series of blood tests that proves
they have quit smoking for a minimum of 6 months. The program is successful and 30 employees
manage to quit smoking. It is so successful that your boss authorizes you to offer a $3,000 bonus the
next year. Unfortunately, at this price only 33 employees manage to quit smoking in this year. Your boss
is unhappy and she asks for a one page memo determining whether or not the program should be
continued. Your boss is an economist, so anything we have discussed in this class is fair to include in
your discussion.
Assume that it costs $5,800 more to employ a smoker than a non-smoker, and your company wants to
minimize any employee turnover. What is the maximum number of smokers you think you can
successfully target? Explain your logic (and calculations) as part of your memo.
Grading will be based on how well you demonstrate understanding of the material we have studied in
the given parameters – make sure to keep this to a 1 page memo.
Question 2: 30 points
Assume you are going to model demand for online courses. You DO NOT need to look up any data for
this question. Discuss your approach. What specific variables do you think are important determinants
for quantity demanded (number of students enrolled in online programs)? What would influence your
choice of model specification?

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