Saturday, February 5, 2011

Microeconomics CLEP

I took the CLEP Principles of Microeconomics exam today and received a score of 67. InstantCert was my primary study tool. Once I felt that I knew that material pretty well, I tried the CLEP practice test and scored a 73. I added some of that material to my study notes and then took two Petersons exams—studying a little more in between the first and second. I got 22/80 incorrect on the first exam and 23/80 incorrect on the second. Somewhat noteworthy—on the second exam I only got five of the first 40 incorrect. It went downhill from there.

I also used the Cliff’s Quick Review Economics book a little (very little) and solidified the comparative advantage computations with Wikipedia—although I ultimately did not need that for the exam. I also used the on-line Spark Notes a little (very little).

The only previous knowledge I had of Microeconomics was the overlap with Macroeconomics—which I did not understand well. I studied for about three weeks—some days for a couple of hours, some days not at all, and some days I just did a run-through of the IC cards to keep the material fresh in my mind.

While taking the test I kept a tally as follows:

Questions for which I was (reasonably) certain of the answer: 47
Questions for which I (generally) was able to narrow it down to one of two answers: 25
Questions for which I guessed: 8

As you can see, there were 80 questions on the exam.

I’ve used the Specific Exam Section to prepare for most of my exams but not so much for this one. I used IC as my primary guide and just tried to solidify my knowledge in the areas introduced there and in the CLEP and Peterson’s practice exams. 

The practice tests are good guides and you’ll see a few VERY similar questions with VERY similar illustrations. The Peterson test #2 goes very deeply into monopolistic competition towards the middle of the test—and I did NOT need to know that much for the actual CLEP (good thing ‘cause I didn’t study that much!). Also, I found the Petersons comparative advantage computation questions a little confusing and my CLEP test did not require anything that intensive. Still, you really DO need to understand the concepts of monopolistic competition and comparative and absolute advantage. 

Many questions include possible answers that intermingle the concepts of comparative advantage, elasticity and curve shifting/movement along a curve. You should know that you’ll be answering more situational questions—as opposed to direct.

I felt there was a heavy concentration on straight supply and demand. That was good. The Peterson tests will give you the impression that the more intensive perfect competition/monopolistic competition/profit-seeking, etc. type questions actually go deeper than they do on the exam. You do have to read curves—but if you’ve studied IC and the CLEP sample pretty well and you come to a few problems in the Petersons exams that just seem TOO involved—that’s because they are. There were maybe TWO questions at the most that seemed to delve that deep. 

Hot Tip: One thing I learned from the Petersons exams that was very valuable and helpful was: if you are looking at an incomprehensible diagram—read the question carefully. If you can distinguish between perfect and monopolistic competition—chances are you’ll be closer to the answer than you think, or, at the very least, you’ll be able to eliminate 2-3 of the choices!

Computations were very light. If you understand GENERALLY how to compute elasticity you’ll be fine. Know what an elasticity score of “1” signifies. There were a few questions with regard to the social costs of externalities. There were only a few “gimmies” and most of the questions require some thought, but not many were exceedingly difficult. Tricky, maybe, but since we can’t see the results I can’t tell you if I got tricked!

There was a production possibilities curve question and a very general anti-trust question, as well an Adam Smith question. You should understand all the basics very well—MR, MC, AVC, AC (not much on AFC) and how they all interact based on the types of business (monopolistic, monopoly, etc.) and how decisions will be made based on market behaviors and various circumstances. Again, use IC and the CLEP practice tests as evidence of how deep you’ll get—and if you find Petersons going a lot deeper—you probably won’t get there on the exam.

Other topics of note:

  • Short Run/Long Run – several questions required you to understand the behaviors of each
  • Substitute/Complement
  • Utility
  • Price Ceilings
  • Public Goods
  • Return to Scale (one of the very few things I did not know ANYTHING about)
  • Positive and Negative Externalities
  • Laws – Diminishing Returns, Supply, Demand
  • Normal and Inferior Goods
  • Capital
  • Barriers
Items that were NOT on my test:

  • Per se
  • Rule of Reason
  • Herfindahl
  • Gini ratio
  • Nash
  • Lorenz
  • Normative
  • Kinked curves
  • Game theory
  • Zero sum
Please note that the description above was for MY test only. I’m quite certain there are other varieties.

Don’t be afraid of this one. If you could handle Macro you definitely should be able to handle Micro.

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