|cost measures (e.g., ATC, AFC, AVC) || 10% || FC is total cost when output is zero; convert to average costs by dividing by output and remember that ATC=AFC+AVC; know when a firm should shut down
|-
|Government policy || 10% || ''unbiased'': price ceilings cause shortages and taxes cause social (deadweight) loss; <br>''biased'': several pollution questions and the Lorenz curve (see discussion of bias below)
|-
|Inputs to a Firm (espec. labor) || 10% || key here is applying logic and other concepts to reason back from product demand to a firm's need for labor (workers); know effects of minimum wage; know that capital is also a necessary resourcein addition to labor
|-
|Perfect Competition || 6% || costs and profits and price are lowest for this market; shut down short run when P<AVC; shut down long run when P<ATC
|}
The above list is all that is on the CLEP exam. At first glance, the CLEP exam may not seem biased. But it is. The CLEP exam omits important conservative concepts like Gresham's Law, transaction costs, the time value of money, and the Coase theorem. These are essential topics in economics. We covered those topics because they are essential, regardless of whether even the CLEP exam asks about ignores them. Note that Instead, the CLEP exam also includes asks more questions about government regulation that one would expect for Microeconomics, which is supposed to be the study of individual firms and markets.
Most But nearly of the questions that are asked on the CLEP exam have unbiased, correct answers. But there The only exceptions where political bias becomes a factor are a few CLEP questions about government regulation that pretend . For these few questions, the CLEP exam pretends that government regulation can make a market ''more'' efficient. This is untrue, as proven by the Coase theorem, but the CLEP exam writers want people to push students into believing think that more regulation is somehow good, and that government can somehow make a market more efficient.
For example, you can expect several to see one or two CLEP questions where the correct answer is to support government regulation against pollution. The best way to think about pollution is in terms of its "negative externality," but the CLEP exam writers cast the issue in terms of an efficient use of resources. Under this view, pollution is inefficient because it results in inefficient harm to the environment. Under the CLEP view, government laws against pollution supposedly increase efficiency by preventing harm to the "resource" of the environment. These regulations that prohibit pollution cause less output but supposedly ensure a more efficient use of environmental resources.
While your instructor supports most of us support a cleaner environment, he does not see how efficiency is not improved by the government interfering in the free market and reducing output. Your instructor would cast As the issue of pollution in terms of its negative externalities, not efficiency. As Coase provedtheorem states, government interference and more transaction costs do not improve efficiency. That said, you can pick up a few one or two easy points on the CLEP exam ''by assuming that environmental regulation increase efficiency by protecting the "resource" of the environment for its better use''.
Outside the topic of government regulation, which is nearly 90% of the CLEP exam, there are no biased answers. Do not choose one answer instead of another for reasons of biasexcept in one or two rare cases.
Be As always, be sure you fully understand the question before you answer it, and use common sense and logic. In fact, many of the questions can be answered correctly by carefully applying common sense and logic, even independent of economic principles.
To prepare for passing the CLEP exam, strive to know at least 80% of the issues covered in the table above extremely well. Go over the above list and see where you need to improve most. Then focus on those areas. But also be sure you understand the easy areas in order to pick up the easy points too.