CLEP Test - Place out of Microeconomics . What did you do? Here's what worked for me....

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I took the CLEP for microeconomics back in maybe 1997, and this is what worked for me. I have no idea if it is still the same test or not. here is a study guide I made that helped me place out of economics: **** ECONOMICS opportunity cost- what must be given up production possibilities frontier- possible combination of goods and services that can be produced microeconomics- study of specifics -analyzes and predicts actions of individuals (household, organization, industry) positive economics- attempts to understand without making judgments normative economics- judge outcomes as good or bad and prescribe actions for improvement -places a value on outcomes models- used to understand and predict real world two-dimensional graph- relationships direct relationship- when line of 2 variables slopes upward (l - r) inverse relationship- slope downward slope- relationship between 2 variables y2-y1 slope = -------- x2-x1 slope inverse relationship- negative number slope direct relationship- positive number slope straight line- constant slope horizontal straight line- zero slope vertical line- undefined cateris paribus- “all else equal” -allows us to isolate and study impact requiring other factors remain unchanged economic rationality- understand what gives them satisfaction and will act in ways that maximize satisfaction. market- environment which goods and services are produced, bought, and sold. circular flow diagram- (pg 223) -consumers and producers producers- create goods and services and make them available for consumer use barter markets- 2 way exchange of goods and services labor- skill, work capital- supplies and equipment land- physical space command economy- decisions made from one central controlling point -usually government agency -consumers can choose not to buy free, laissez faire economy- individuals act in won best interest -no government intervention Adam Smith- father of modern-day economics -laissez faire- “the invisible hand” microeconomics- individual economic decisions and behavior demand- relationship between various prices of a product and the amount a consumer would purchase at each price -what consumers would buy demand curve or demand schedule- line that reflects all the price/quantity combinations demanded for a particular product -price- y axis -quantity- x axis law of demand- inverse relationship between price and quantity -slope downward -buy more at lower price changes in demand- due to factors other than item price income- measures ongoing stream of earnings wealth- measures net assets normal goods- good and services for which demand rises when earnings rise inferior goods- goods and services for which demand falls when earnings rise -mark-down outfit vs. designer dress complementary goods- used in tandem with goods or services being analyzed -tape player & tape -bats & balls substitute goods- used instead of item -coffee v. tea -coke v. pepsi utility- amount of satisfaction an individual gains from consuming a product marginal utility- extra satisfaction from consuming one more unit of an item -decreases as units increase law of diminishing marginal utility- satisfaction decrease as more units consumed elasticity- how sensitive one variable changes another price elasticity of demand- measure of how sensitive quantity demanded is to a change in price high price elasticity- quantity demanded reacts strongly to small change in price -have many substitutes low price elasticity- demand changes little -no close substitutes (q2-q1)/q1 price elasticity of demand = ------------- = slope (p2-p1)p1 responding factor- quantity demanded causative factor- price inelastic- elasticity is less than 1 (absolute number) perfectly elastic- horizontal demand curve -little increase in price= demand 0 perfectly inelastic- vertical demand -price no effect on quantity supply- relationship between the price of a product and the quantity firms will produce and offer for sale supply curve, supply schedule- connects points -shows effect of price changes law of supply- relationship between price and quantity supplied capital- goods -equipment, factories, copyrights marginal output- amount of additional output associated with adding one more unit of input -one more pasta maker law of diminishing returns- marginal product declines at some point when variable inputs are being added to fixed inputs capital costs- fixed labor costs- variable fixed costs- short-run, do not change with output rate -rent variable costs- inputs that change -labor total cost (TC)- sum of total fixed income (TFI) and total variable cost (TVC) point of diminishing returns- point at which marginal costs rise economics of scale- increase scale= decrease average costs diseconomics of scale- increase scale= increase average costs total revenue- total dollar amount that a firm receives from selling its product = (price per unit) x (quantity of output that the firm produces and sells) profit- difference between total revenue and total cost of production marginal revenue- additional revenue that get from increasing output by one more unit -in competitive industry ( one which individual firm cant influence market price) marginal revenue= price market equilibrium- quantity demanded= quantity supplied -equilibrium price and equilibrium quantity perfectly competitive market- -suppliers’ products are homogeneous -no barriers to entry or exit -are price takers -unable to sell at higher than market price monopoly- one firm supplies a good or service -no close product substitutes -barriers to entry and exit -can set own price oligopoly- a few firms dominate product market monopolistic competition- many firms comptete for the same consumer market, but products slightly different Adam Smith- “the invisible hand” -the way markets regulate themselves through individuals self-interests Karl Marx- value of goods and services depends solely upon the value of labor -capitalist system morally wrong -basis for evolution of communist John Maynard Keynes- father of “Keynesian economics” -macroeconomics Milton Freidman- critic of government efforts to stabilize economy -slow and steady money growth -market determined results are better than government determined results