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== Topics on Exam ==

== Topics on Exam ==

Here is a list of the topics on the CLEP exam, along with how many questions are asked about each topic (as a percentage of the overall exam) and comments:

Here is a list of the topics on the CLEP exam, along with how many questions are asked about each topic (as a percentage of the overall exam), and comments:

{| class="wikitable"

{| class="wikitable"

|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 below)

|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 below)

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|-

|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; might also be asked about capital

|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 laws; might also be asked about capital

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|-

|Perfect Competition || 6% || costs and profits and price are lowest for this market: P=MC=ATC and "economic profits" are squeezed to zero. If price falls, shut down short run when P<AVC; shut down long run when P<ATC.

|Perfect Competition || 6% || costs and profits and price are lowest for this market: P=MC=ATC and "economic profits" are squeezed to zero. If price falls, shut down in short run when P<AVC; shut down in long run when P<ATC.

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|Monopolistic Competition || 6% || can set its price above MC, but low barrier to entry prevent long run profits and require P=ATC

|Monopolistic Competition || 6% || can set its price above MC, but the low barrier to entry allows competitive forces that prevent long run profits and require P=ATC

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|-

|Production Possibilities ||6% || trade-off among goods output; requires technological advance or other big change to reach points beyond the "frontier" (curve)

|Production Possibilities ||6% || trade-off among goods output; requires technological advance or other big change to reach points beyond the "frontier" (curve)

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|-

|Price Elasticity || 5% || measures how demand responds to price changes; "elastic" means big change in demand for small change in price of good

|Price Elasticity || 5% || measures how demand responds to price changes; "elastic" means big change in demand for a small change in price of good

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|-

|Monopolies || 4% || the firm sets its price above marginal cost, but not higher than where MR=MC; economic profits are greater than zero; economic rent exists. P>MC. P>ATC.  

|Monopolies || 4% || the firm sets its price above marginal cost, but not higher than where MR=MC; economic profits are greater than zero; economic rent exists. P>MC. P>ATC.  

|MR || 4% || marginal revenue is the ''increase'' in total revenue due to selling one more unit; profit maximized where MR=MC

|MR || 4% || marginal revenue is the ''increase'' in total revenue due to selling one more unit; profit maximized where MR=MC

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|MC || 4% || marginal cost, which equals price in perfect competition, but which is less than price but equals MR for a monopoly

|MC || 4% || marginal cost, which equals price in perfect competition.  For a monopoly P>MC but equals MR=MC

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|Public Goods || 3% || know the difference between these and private goods: public goods cannot exclude people from using the good

|Public Goods || 3% || know the difference between these and private goods: public goods cannot exclude people from using the good

|Comparative Advantage || 2% || nation with lower production costs should do what it does best

|Comparative Advantage || 2% || nation with lower production costs should do what it does best

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|-

|Oligopoly || 2% || only a few firms, like two gas stations at an intersection far aware from any others; one Nash Equilibrium-type question

|Oligopoly || 2% || only a few firms, like two gas stations at an intersection far aware from any others; usually one Nash Equilibrium-type exam question

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|Imperfect Competition || 2% || P>MC for this market, which is "allocatively inefficient" (is not efficient in the allocation of resources); it takes perfect competition to drive P down to MC

|Imperfect Competition || 2% || P>MC for this market, which is "allocatively '''in'''efficient" (is not efficient in the allocation of resources); it takes perfect competition to drive P down to MC

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|Utility || 2% || Overall satisfaction.  Recall our problem about hiking and reading?  Marginal utility is your next bit of utility.  Indifference curve shows trade-off in utility.

|Utility || 2% || Overall satisfaction.  Recall our problem about hiking and reading?  Marginal utility is your next bit of utility.  Indifference curve shows trade-off in utility.

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|Complements || 2% || think ketchup with french fries

|Complements || 2% || think ketchup with french fries

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|Long Run v. Short Run || 2% || in the long run all costs are variable and can be minimized; short and long run mentioned in 20% of questions, to distinguish between quick changes and permanent ones

|Long Run v. Short Run || 2% || in the long run all costs are variable and can be minimized; short and long run mentioned in 20% of questions, to distinguish between quick changes and permanent ones

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|-

|Externalities || 2% || two types: positive (music in an open-air park) and negative (pollution)

|Externalities || 2% || two types: positive (music in an open-air park) and negative (pollution)

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|Cartel || 1% || an oligopoly that illegally agrees to fix (set) prices, as OPEC does

|Cartel || 1% || an oligopoly that illegally agrees to fix (set) prices, as OPEC does

|}

|}

The above list is all that is on the CLEP exam, in the percentages shown.  At first glance, the CLEP exam may not seem biased.  But it is.  The CLEP exam omits important concepts like the invisible hand, free market, charity, transaction costs, the time value of money, interest rates, the Coase theorem and Gresham's Law.  Why does the CLEP ignore these fundamental aspects of economics?  Because each of these concepts tend to lead students toward truthful, but conservative, conclusions.  For example, once a student realizes how inefficient transaction costs are, he or she will probably not like government regulations much!  So instead of these concepts, the CLEP exam adds lots of questions about government regulation that cast it in a positive light.  Also, even when the CLEP exam does include certain topics like opportunity cost, it asks less about it than it should.

The above list is all that is on the CLEP exam, in the percentages shown.  At first glance, the CLEP exam may not seem biased.  But it is.  The CLEP exam omits important concepts like the invisible hand, free market, charity, transaction costs, the time value of money, interest rates, the Coase theorem and Gresham's Law.  Why does the CLEP ignore these fundamental aspects of economics?  Because each of these concepts tend to lead students toward truthful, but conservative, conclusions.  For example, once a student realizes how inefficient transaction costs are, he or she will probably not like government regulations much!  Instead of these concepts, the CLEP exam adds lots of questions about government regulation that cast it in a positive light.  Also, even when the CLEP exam does include certain topics like opportunity cost, it asks less about them than it should.

But don't think most of the CLEP questions and answers are biased.  They are not.  Nearly all of the questions on the CLEP exam have unbiased, correct answers.  The only exceptions where political bias becomes a factor are a few questions about government regulation.  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 think that more regulation is somehow good, and that government can somehow make a market more efficient.

But don't think most of the CLEP questions and answers are biased.  They are not.  Nearly all of the questions on the CLEP exam have unbiased, correct answers.  The only exceptions where political bias becomes a factor are a few questions about government regulation.  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 think that more regulation is somehow good, and that government can somehow make a market more efficient.