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| | |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; capital is necessary in addition to labor | + | |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 |
| | |- | | |- |
| | |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 | | |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 |
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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 low barrier to entry prevent long run profits and require P=ATC |
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| − | |Production Possibilities ||6% || trade-off among goods output; easy to answer these once the basic concept is learned | + | |Production Possibilities ||6% || trade-off among goods output; requires technological advance or other big change to reach points beyond the "frontier" (curve) |
| | |- | | |- |
| | |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 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 | | |Monopolies || 4% || the firm sets its price above marginal cost, but not higher than where MR=MC |
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| − | |Demand Curve || 4% || what the public will pay; all firms are restrained by the Law of Demand | + | |Demand Curve || 4% || what the public will pay; all firms in all kinds of markets are restrained by the Law of Demand |
| | |- | | |- |
| | |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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| | |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 inefficient" (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 the problem about hiking and reading? Marginal utility is your next bit of utility. Indifference curve shows tradeoff 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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| − | |Cross-Price Elasticity || 2% || Comparing change in demand for one good due to change in price for another | + | |Cross-Price Elasticity || 2% || Comparing change in demand for one good due to change in price for a ''different'' good |
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| | |Opportunity Cost || 2% || keep in mind that "economic costs" include opportunity costs in addition to actual out-of-pocket (accounting) costs | | |Opportunity Cost || 2% || keep in mind that "economic costs" include opportunity costs in addition to actual out-of-pocket (accounting) costs |
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| | |Complements || 2% || think ketchup and french fries | | |Complements || 2% || think ketchup and french fries |
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| − | |Inferior v. Normal Goods || 2% || income goes up, demand for these goods goes down; example: demand for bankruptcy services | + | |Inferior v. Normal Goods || 2% || when income goes up, demand for an inferior good or service goes down (e.g., demand for bankruptcy services) |
| | |- | | |- |
| − | |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 | + | |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 |
| | |- | | |- |
| − | |Externalities || 2% || positive (music in an open-air park) and negative (pollution) | + | |Externalities || 2% || two types: positive (music in an open-air park) and negative (pollution) |
| | |- | | |- |
| − | |Cartel || 1% || an oligopoly that illegally agrees to fix prices, as OPEC does | + | |Cartel || 1% || an oligopoly that illegally agrees to fix (set) prices, as OPEC does |
| | |- | | |- |
| | |Price discrimination || 1% || charging different prices for the good; only possible if the market allows the firm to set its own price | | |Price discrimination || 1% || charging different prices for the good; only possible if the market allows the firm to set its own price |
| | |} | | |} |
| | | | |
| − | 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, even the CLEP ignores them. Instead, the CLEP exam asks more about government regulation that one would expect for Microeconomics, which is the study of individual firms and markets. Also, the CLEP exam asks fewer questions about opportunity cost and other important conservative concepts 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 conservative concepts like Gresham's Law, transaction costs, the time value of money, and the Coase theorem. These are essential topics, even the CLEP ignores them. Instead, the CLEP exam asks more about government regulation that one would expect for Microeconomics, which is the study of individual firms and markets. Also, the CLEP exam asks fewer questions about opportunity cost and other important conservative concepts than it should. |
| | | | |
| | But nearly of the questions that are asked 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 nearly of the questions that are asked 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. |