Presenting a diagnostic teaching unit for grade 7 language arts, this handbook is intended to be used along with the companion handbook 1, "Evaluating Students' Learning and Communication Processes: Integrating Diagnostic Evaluation and Instruction." The student activities of the diagnostic teaching units in the handbook have been designed to engage students in the six learning and communication processes (exploring, narrating, imagining, empathizing, abstracting, and monitoring) described in the companion handbook. The first part of the handbook presents a diagnostic teaching unit entitled "What's So Funny? (The Lighter Side of Life)" and includes a general description of the lessons in the unit followed by more detailed plans for each lesson. The final section of the unit contains supplementary materials created to support the lessons in the unit. The second part of the handbook shows how to apply the evaluation and instructional strategies of the companion handbook to the student work generated as the students engage in the learning activities of the unit described in the first part of the handbook. The second part of the handbook also presents samples of students' work drawn from field trials of the diagnostic teaching unit, along with a discussion of the learning and communication processes exemplified in the work. (RS)