Principles of Microeconomics CLEP - Free Study Guide!

Name of Exam: Principles of Microeconomics CLEP

Number of Questions: 80

Time Limit: 90 Minutes

ACE Recommended Passing Score: 50

Practice Test Available?: Yes - Click here

Cost: $72 (Starting July 1st 2009) + Sitting Fee (Usually no more than $20) at your testing site. Military can take CLEPs for free with Tuition Assistance. Check with your Educational Officer!

Difficulty 1-5 : 4
(One being the easiest, and five being the hardest)

Alternatives: StraighterLine Microeconomics

Exam Description:

The Principles of Microeconomics CLEP tests the taker's knowledge on a wide variety of economic principles. The principles are tested as they apply to the individual consumers and businesses that make up the greater economy.

Test takers will be expected to know and understand a range of topics, such as free market economies and how they utilize available resources. The determination of wages in factor markets, as well as the distribution of income will also be tested. Other areas of focus will be the CLEP taker's understanding of government intervention into private industries through regulations, and the purpose and result of that intervention.

Personal Thoughts:

As I mentioned in the Macroeconomics study guide, most people find this subject an intimidating one. If you haven't taken the Principles of Macroeconomics CLEP yet, then I'd suggest you do so before tackling this particular exam. Most of the information found on Macroeconomics will help when it's time for you to take the Principles of Microeconomics CLEP. Think of Macroeconomics as looking at Economics from ten miles high before you dive into the weeds with Microeconomics.

The (not so) good news? At the time of this writing (2009) our economy is going through the ringer and I keep hearing topics from Microeconomics in the news. Market Equilibrium, Regulation (big one in today's headlines), and Income Distribution have all been mentioned lately. If there was ever a time to understand the theories behind Macro and Micro economics, it's now!

Exam breakdown:

According to the College Board website, the Principles of Microeconomics CLEP exam is broken down as follows:

• 55%-70% The Nature and Functions of Product Markets
• 12%-18% Market Failure and the Role of Government
• 10%-18% Factor Markets
• 08%-14% Basic Economic Concepts

I always try to list the breakdowns as simply as I can rather than just pointing you at the College Board website. College Board sometimes lists some very general topics which don't help out a lot with studying. I try to include the ones that I know are tested.

For the Principles of Microeconomics CLEP, you will want to take a look at the College Board website linked above. They break down "The Nature and Functions of Product Markets" even further into sub-topics. In my opinion it's needlessly confusing, but you may get something out of it. I'll try to simplify them below.

Areas of Study

• Profit maximization: MR=MC rule
• Perfect competition
• Profit maximization
• Shortrun supply and shut down decision
• Firm and market behaviors in short run and long run equilibrium
• Efficiency and perfect competition
• Monopoly
• Sources of market power
• Inefficiency of monopoly
• Price discrimination
• Oligopoly
• Interdependence, collusion, and cartels
• IGame theory and strategic behavior
• Monopolistic competition
• Profit maximization
• Shortrun and longrun equilibrium
• Excess capacity and inefficiency
• Supply and demand
• Price and quantity controls
• Elasticity
• Price, income, and crossprice elasticities of demand
• Price elasticity of supply
• Tax incidence and deadweight loss
• Shortrun costs
• Longrun costs and economies of scale
• Cost minimizing input combination
• Total utility and marginal utility
• Utility maximization: equalizing marginal utility per dollar
• Individual and market demand curves
• Income and substitution effects
• Marginal social benefit and marginal social cost
• Positive externalities
• Provision of public goods
• Public policy to promote competition
• Antitrust policy
• Regulation
• Income distribution
• Equity
• Derived factor demand
• Marginal revenue product
• Labor market and firms' hiring of labor
• Economic systems
• Production Possibilities Curves
• Scarcity, choice, and opportunity cost
• Property rights and the role of incentives

Free study resources
Click on the titles to go to the study resource.

CyberEconomics Micro Portion - A great resource for both the Principles of Macroeconomics CLEP and the Principles of Microeconomics CLEP. Dr. Schenk has truly done a great job with the site. Use the Microeconomics Topic Index to find definitions for topics and terms, and don't miss the "Who's Who" section on the bottom of the index page. It gives an outstanding timeline for many of the big players in Economics.

The Concise Encyclopedia of Economics - Concise it may be, but condensed it is not. However, the index is a valuable tool. If you can't find any information on a specific topic, look in the index and click on the page number. Hovering your mouse above the page number will give you an idea of what that link pertains to.

About.com Online Economics Textbook - There are some things that About.com does very well, and academics tends to be one of them. A great resource for the Principles of Microeconomics CLEP that's broken down into chapters according to topics. The Chapter on Elasticity is worth mention all by itself thanks to it's "Beginner's Guide to Elasticity" article.

University of California Micro Quizzes and biz/ed UK Quizzes - I really like these. They are small (10 questions or so) quizzes based on Microeconomics, but they are separated into topics (Demand Curves, Consumer Theory, Elasticities) Use the study resources provided, and then test your knowledge with these quizzes. The biz/ed takes a while to load, but the subject matter is well worth the wait.

Recommended bargain-priced study resources

CLEP Principles of Microeconomics w/ CD-ROM (REA)-The Best Test Prep - Unlike it's Macroeconomic counterpart, I liked REA's offering for the Principles of Microeconomics CLEP. It does take for granted that you already have at least a basic understanding of Economics, so it sometimes goes into detail that can leave the newcomer scratching their heads. Use one of the free resources above to look up the terms if this happens.

Cracking the AP Economics Macro & Micro Exams, 2009 Edition (College Test Preparation) - Rather than one of the recommended textbooks, I would suggest picking this up instead. It's actually for the Macro and Micro AP exams, but it should give you a firm foundation in both for the CLEPs. A little extra studying with one of the supplemental resources and you should be fine. It's also much cheaper than buying one, let alone two textbooks to prepare for these.

Standard Deviants: Microeconomics - A great DVD series on Microeconomics. As always, check to see if your local library has them first. Mine had a copy of the Macro DVD's, but I ended up having to buy the Micro series. Well worth the money though.

InstantCert Academy - Principles of Microeconomics Specific Exam Feedback - Three pages of study notes, specific topics of study, and after action reports. Be sure to check out the Flashcards for the Principles of Microeconomics CLEP as well.

If you don't know what InstantCert is, then click here for the scoop as well as a discount code: **InstantCert Academy**

You'll find an InstantCert link for every exam here if that gives you an idea of the amount of information they have available. It's an outstanding resource.

The Principles of Microeconomics CLEP exam is, in my opinion, a bit tougher than the Macroeconomics CLEP. If you take Macroeconomics first, or if you've had an economics class before, then you're probably going to be fine with a bit of targeted study. Know the formulas just like you did for Macroeconomics and be able to read and understand the graphs. Instant Cert has quite a few examples of graphs in the flashcards if you're a subscriber.

Best of luck!