CLEP® Principles of Microeconomics Book + Online

By Richard Sattora

Earn College Credit with REA's Test Prep for CLEP Principles of Microeconomics

Everything you need to pass the exam and get the college credit you deserve.

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• Language: English
• Publisher: Research & Education Association
• Release date: Feb 15, 2012
• ISBN: 9780738670997

Book preview

REA : THE LEADER IN CLEP TEST PREP

CLEP

PRINCIPLES OF MICROECONOMICS

Richard Sattora, M.S.

Recipient of the Blue Ribbon Teacher of Economics Award

from the Federal Reserve Bank of Dallas

Research & Education Association

Visit our website a t: www.rea.com/studycenter

Research & Education Association

61 Ethel Road West

Piscataway, New Jersey 08854

E-mail: [e-mail]

CLEP Principles of Microeconomics

Copyright © 2012 by Research & Education Association, Inc. Prior edition copyright © 2008. All rights reserved. No part of this book may be reproduced in any form without permission of the publisher.

Printed in the United States of America

Library of Congress Control Number 2011946210

eISBN-13: 978-0-7386-7099-7

All trademarks cited in this publication are the property of their respective owners.

LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: Publication of this work is for the purpose of test preparation and related use and subjects as set forth herein. While every effort has been made to achieve a work of high quality, neither Research & Education Association, Inc., nor the authors and other contributors of this work guarantee the accuracy or completeness of or assume any liability in connection with the information and opinions contained herein and in REA’s software and/or online materials. REA and the authors and other contributors shall in no event be liable for any personal injury, property or other damages of any nature whatsoever, whether special, indirect, consequential or compensatory, directly or indirectly resulting from the publication, use or reliance upon this work.

REA® is a registered trademark of

Research & Education Association, Inc.

CELP principles of microeconomics

Unlock your CLEP Online Tools by

following the instructions

found at the back of this book.

CONTENTS

About the Author

Author Acknowledgments

About Research & Education Association

Publishisher Acknowledgments

CHAPTER 1

Passing the CLEP Principles of Microeconomics Exam

Getting Started

The REA Study Center

An Overview of the Exam

All About the CLEP Program

Options for Military Personnel and Veterans

SSD Accommodations for Candidates with Disabilities

6-Week Study Plan

Test-Taking Tips

The Day of the Exam

Online Diagnostic Test     www.rea.com/studycenter

CHAPTER 2

Basic Economic Concepts Review

Key Terms

Economic Foundations

Economic Methodology

Origins of Supply

Origins of Demand

The Nature and Function of Product Markets

Circular Flow Model

CHAPTER 3

CLEP Microeconomics Course Review

Key Terms

The Nature and Function of Product Markets

Interaction of Supply and Demand

Price Elasticity of Demand

The Total Revenue Test

Cross Elasticity of Demand

Price Elasticity of Supply

Consumer Choice

Income Constraints and Budget Limits

Producer Behavior

Opportunity (Economic) Cost

Producer Time Constraints

Short-Run Production Costs

Cost Analysis

Long-Run Costs of Production

Four Production Market Models

Factor Markets

Pricing and Employment of Factor Markets

Marginal Resource Productivity Theory

The Labor Market and Wages

Efficiency, Equity, and the Role of Government

Government Intervention

Main Government Intervention Methods

Income Equality and Poverty

Taxation

Transfer Payments .

Antidiscrimination Laws

Practice Test 1 (also available online at www.rea.com/studycenter )

Answer Key

Detailed Explanations of Answers

Practice Test 2 (also available online at www.rea.com/studycenter )

Answer Key

Detailed Explanations of Answers

Answer Sheets

Glossary

Index

ABOUT THE AUTHOR

Richard Sattora is an AP Economics teacher at Excelsior Award-winning Pittsford Mendon High School, Pittsford, N.Y., where he has taught for 30 years. The caliber of his work has brought Mr. Sattora recognition from Who’s Who Among America’s Teachers and the Federal Reserve Bank of Dallas, which named him a Blue Ribbon Teacher of Economics.

In 2005, under Mr. Sattora’s direction, Pittsford Mendon High School’s Federal Reserve Challenge Team won the Fed Challenge national championship. This prestigious national economics competition is sponsored by the Board of Governors of the Federal Reserve System and promotes a greater understanding of economics among students. Recently, Mr. Sattora designed an Economic Education Institute blueprint for the Federal Reserve Bank of New York. A graduate of Canisius College, he holds an M.S. degree from Nazareth College.

Mr. Sattora’s varied background in economics gives him a balanced perspective on the subject. He has worked for Eastman Kodak Co. and been involved in many entrepreneurial activities in the real estate, restaurant, and landscaping fields. He is a member of the Rochester Area Council of Social Studies and the Association of Private Enterprise Educators.

AUTHOR ACKNOWLEDGMENTS

I extend special thanks to my wife, Jeanette, and my sons, Jeffrey and Christopher, without whose patience and support this work could not have been completed. I would also like to acknowledge my parents, Howard and Betty, for the special role they played in all of my accomplishments. I am grateful to the former and current staff of the Federal Reserve Bank of Dallas, especially Wayne Hast, whose generosity and support for high school economics teachers allowed me to attend my first APEE conference that began this journey. I also thank other members of the Federal Reserve Bank of Dallas including former President Bob McTeer, Chief Economist C. Michael Cox, and economist Bob Formiani whose presentations and writings continue to educate and inspire me. Finally, I would like to thank the staff of the Federal Reserve Branch Bank of Buffalo, economist Richard Dietz, Kausar Hamdani, and Diana Bley for their support of my Federal Reserve Challenge Team.

—Richard Sattora

ABOUT RESEARCH & EDUCATION ASSOCIATION

Founded in 1959, Research & Education Association (REA) is dedicated to publishing the finest and most effective educational materials—including software, study guides, and test preps—for students in middle school, high school, college, graduate school, and beyond.

Today REA’s wide-ranging catalog is a leading resource for teachers, students, and professionals.

PUBLISHER ACKNOWLEDGMENTS

We would like to thank Pam Weston, Publisher, for setting the quality standards for production integrity and managing the publication to completion; John Paul Cording, Vice President, Technology, for coordinating the design and development of the REA Study Center; Larry B. Kling, Vice President, Editorial, for his supervision of revisions and overall direction; Diane Goldschmidt and Michael Reynolds, Managing Editors, for coordinating development of this edition; Transcend Creative Services for typesetting this edition; and Weymouth Design and Christine Saul, Senior Graphic Designer, for designing our cover.

CHAPTER 1

Passing the CLEP Principles of Microeconomics Exam

CHAPTER 1

PASSING THE CLEP PRINCIPLES OF MICROECONOMICS EXAM

Congratulations! You’re joining the millions of people who have discovered the value and educational advantage offered by the College Board’s College-Level Examination Program, or CLEP. This test prep covers everything you need to know about the CLEP Microeconomics exam, and will help you earn the college credit you deserve while reducing your tuition costs.

GETTING STARTED

There are many different ways to prepare for a CLEP exam. What’s best for you depends on how much time you have to study and how comfortable you are with the subject matter. To score your highest, you need a system that can be customized to fit you: your schedule, your learning style, and your current level of knowledge.

This book, and the online tools in the CLEP package, allow you to create a personalized study plan through three simple steps: assessment of your knowledge, targeted review of exam content, and reinforcement in the areas where you need the most help.

$1.99 unlocks the CLEP online tools at www.rea.com/studycenter

Let’s get started and see how this system works.

THE REA STUDY CENTER

The best way to personalize your study plan and focus on your weaknesses is to get feedback on what you know and what you don’t know. At the online REA Study Center, you can access two types of assessment: a diagnostic exam and full-length practice exams. Each of these tools provides true-to-format questions and delivers a detailed score report that follows the topics set by the College Board.

Diagnostic Exam

Before you begin your review with the book, take the online diagnostic exam. Use your score report to help evaluate your overall understanding of the subject, so you can focus your study on the topics where you need the most review.

Full-length Practice Exams

These practice tests give you the most complete picture of your strengths and weaknesses. After you’ve finished reviewing with the book, test what you’ve learned by taking the first of the two online practice exams. Review your score report, then go back and study any topics you missed. Take the final practice test to ensure you have mastered the material and are ready for test day.

$1.99 unlocks the CLEP online tools at www.rea.com/studycenter

If you’re studying and don’t have Internet access, you can take the printed tests in the book. These are the same practice tests offered at the REA Study Center, but without the added benefits of timed testing conditions and diagnostic score reports. Because the actual exam is computer-based, we recommend you take at least one practice test online to simulate test-day conditions.

AN OVERVIEW OF THE EXAM

The CLEP Principles of Microeconomics exam covers the material one would find in a college-level introductory microeconomics class. The exam requires the test-taker to analyze and evaluate economic decisions, demonstrate an understanding of how free markets work, and understand how individual consumers and firms make economic decisions.

The exam consists of 80 multiple-choice questions, each with five possible answer choices, to be answered in 90 minutes.

The approximate breakdown of topics is as follows:

ALL ABOUT THE CLEP PROGRAM

What is the CLEP?

CLEP is the most widely accepted credit-by-examination program in North America. CLEP exams are now available in 33 subjects and test the material commonly required in an introductory-level college course. Examinees can earn from three to twelve credits at more than 2,900 colleges and universities in the U.S. and Canada. For a complete list of the CLEP subject examinations offered, visit the College Board website: www.collegeboard.org/clep.

WHO takes CLEP exams?

CLEP exams are typically taken by people who have acquired knowledge outside the classroom and who wish to bypass certain college courses and earn college credit. The CLEP program is designed to reward examinees for learning—no matter where or how that knowledge was acquired.

Although most CLEP examinees are adults returning to college, many graduating high school seniors, enrolled college students, military personnel, veterans, and international students take CLEP exams to earn college credit or to demonstrate their ability to perform at the college level. There are no prerequisites, such as age or educational status, for taking CLEP examinations. However, because policies on granting credits vary among colleges, you should contact the particular institution from which you wish to receive CLEP credit.

Who administers the exam?

CLEP exams are developed by the College Board, administered by Educational Testing Service (ETS), and involve the assistance of educators from throughout the United States. The test development process is designed and implemented to ensure that the content and difficulty level of the test are appropriate.

When and where is the exam given?

CLEP exams are administered year-round at more than 1,200 test centers in the United States and can be arranged for candidates abroad on request. To find the test center nearest you and to register for the exam, contact the CLEP Program:

CLEP Services

P.O. Box 6600

Princeton, NJ 08541-6600

Phone: [phone] (8 a.m. to 6 p.m. ET)

Fax: [phone]

Website: www.collegeboard.org/clep

OPTIONS FOR MILITARY PERSONNEL AND VETERANS

CLEP exams are available free of charge to eligible military personnel and eligible civilian employees. All the CLEP exams are available at test centers on college campuses and military bases. Contact your Educational Services Officer or Navy College Education Specialist for more information. Visit the DANTES or College Board websites for details about CLEP opportunities for military personnel.

Eligible U.S. veterans can claim reimbursement for CLEP exams and administration fees pursuant to provisions of the Veterans Benefits Improvement Act of 2004. For details on eligibility and submitting a claim for reimbursement, visit the U.S. Department of Veterans Affairs website at www.gibill.va.gov/pamphlets/testing.htm.

CLEP can be used in conjunction with the Post-9/11 GI Bill, which applies to veterans returning from the Iraq and Afghanistan theaters of operation. Because the GI Bill provides tuition for up to 36 months, earning college credits with CLEP exams expedites academic progress and degree completion within the funded timeframe.

SSD ACCOMMODATIONS FOR CANDIDATES WITH DISABILITIES

Many test candidates qualify for extra time to take the CLEP exams, but you must make these arrangements in advance. For information, contact:

College Board Services for Students with Disabilities

P.O. Box 6226

Princeton, NJ 08541-6226

Phone: [phone] (Monday through Friday, 8 a.m. to 6 p.m. ET)

TTY: [phone]

Fax: [phone]

E-mail: [e-mail]

6-WEEK STUDY PLAN

Although our study plan is designed to be used in the six weeks before your exam, it can be condensed to three weeks by combining each two-week period into one.

Be sure to set aside enough time—at least two hours each day—to study. The more time you spend studying, the more prepared and relaxed