College-Level Examination Program (CLEP) Economics Syllabus

Economics syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Economics in College-Level Examination Program (CLEP), not a summary of it.

1. 1

   Principles of Microeconomics

   4 topics

   • Basic Economic Concepts
     • Scarcity, choice, and opportunity cost
     • Production possibilities and comparative advantage
   • Supply and Demand
     • Market equilibrium
     • Elasticity
     • Consumer and producer surplus
   • Theory of the Firm
     • Production and costs
     • Perfect competition
     • Monopoly and imperfect competition
   • Factor Markets and Market Failure
     • Labor and resource markets
     • Externalities and public goods
     • Role of government
2. 2

   Principles of Macroeconomics

   4 topics

   • Measurement of Economic Performance
     • Gross domestic product
     • Inflation and price indices
     • Unemployment
   • Aggregate Demand and Supply
     • National income determination
     • Business cycles
   • Money and Monetary Policy
     • Money and banking
     • The Federal Reserve and monetary policy
   • Fiscal Policy and Global Economics
     • Government spending and taxation
     • Economic growth
     • International trade and finance
3. 3

   Comparative and Applied Economics

   3 topics

   • Economic Systems
     • Market, command, and mixed economies
   • International Economics
     • Trade theory and policy
     • Exchange rates and balance of payments
   • Economic Growth and Development
     • Determinants of growth
     • Development challenges

Economics flashcards for College-Level Examination Program (CLEP)

23 of 50 cards from the Economics deck — real questions with worked answers.

1. What is the economic problem of scarcity?

   Scarcity is the condition in which unlimited human wants exceed the limited resources available to satisfy them, forcing individuals and societies to make choices.

2. Define opportunity cost.

   Opportunity cost is the value of the next-best alternative that must be given up when a choice is made.

3. What do the four factors of production consist of, and what payment does each earn?

   Land (earns rent), Labor (earns wages), Capital (earns interest), and Entrepreneurship (earns profit).

4. What does a Production Possibilities Curve (PPC) illustrate, and what does a point inside it indicate?

   The PPC shows the maximum combinations of two goods an economy can produce with full, efficient resource use. A point inside indicates inefficiency or unemployment of resources; a point outside is currently unattainable.

5. Distinguish absolute advantage from comparative advantage.

   Absolute advantage is the ability to produce more of a good using the same resources. Comparative advantage is the ability to produce a good at a lower opportunity cost; it determines who should specialize and trade.

6. State the law of demand.

   All else equal, as the price of a good rises, the quantity demanded falls, and as price falls, quantity demanded rises (an inverse relationship), producing a downward-sloping demand curve.

7. State the law of supply.

   All else equal, as the price of a good rises, the quantity supplied rises, and as price falls, quantity supplied falls (a direct relationship), producing an upward-sloping supply curve.

8. What is the difference between a change in quantity demanded and a change in demand?

   A change in quantity demanded is movement along the demand curve caused by a price change; a change in demand is a shift of the entire curve caused by non-price determinants (income, tastes, prices of related goods, expectations, number of buyers).

9. What is market equilibrium, and what causes a surplus versus a shortage?

   Equilibrium is the price where quantity demanded equals quantity supplied. A surplus (excess supply) occurs when price is above equilibrium; a shortage (excess demand) occurs when price is below equilibrium.

10. What is the formula for price elasticity of demand, and what does elastic vs. inelastic mean?

    Price elasticity of demand = % change in quantity demanded ÷ % change in price. Demand is elastic if the coefficient (absolute value) is greater than 1, inelastic if less than 1, and unit elastic if equal to 1.

11. How does a price ceiling differ from a price floor, and what does each create?

    A price ceiling is a legal maximum price set below equilibrium, creating a shortage (e.g., rent control). A price floor is a legal minimum price set above equilibrium, creating a surplus (e.g., minimum wage).

12. Define consumer surplus and producer surplus.

    Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. Producer surplus is the difference between the price producers receive and the minimum they are willing to accept.

13. What does the law of diminishing marginal utility state?

    As a person consumes additional units of a good, the marginal (extra) utility gained from each successive unit eventually declines.

14. Distinguish explicit costs from implicit costs, and accounting profit from economic profit.

    Explicit costs are out-of-pocket monetary payments; implicit costs are the opportunity costs of using owner-supplied resources. Accounting profit = revenue − explicit costs; economic profit = revenue − explicit − implicit costs.

15. What is the law of diminishing marginal returns?

    As successive units of a variable input are added to a fixed input, the marginal product of the variable input eventually decreases.

16. State the profit-maximizing rule for any firm.

    A firm maximizes profit by producing the quantity where marginal revenue equals marginal cost (MR = MC).

17. What is the relationship between marginal cost and average total cost at the minimum of ATC?

    The marginal cost curve intersects the average total cost curve at its minimum point; when MC is below ATC, ATC falls, and when MC is above ATC, ATC rises.

18. List the four market structures from most to least competitive.

    Perfect competition, monopolistic competition, oligopoly, and monopoly.

19. What are the key characteristics of perfect competition?

    Many small firms, identical (homogeneous) products, free entry and exit, perfect information, and firms are price takers facing a perfectly elastic (horizontal) demand curve.

20. In long-run equilibrium, why do perfectly competitive firms earn zero economic profit?

    Free entry and exit drive price to equal minimum average total cost, so firms earn only normal profit (zero economic profit).

21. What defines a monopoly and how does its pricing differ from perfect competition?

    A monopoly is a single seller of a product with no close substitutes and high barriers to entry. It is a price maker, produces less, and charges a higher price than a competitive market, with price above marginal cost.

22. What is the defining feature of monopolistic competition?

    Many firms selling differentiated products with low barriers to entry; firms have some price-setting power but earn zero economic profit in the long run due to entry.

23. What characterizes an oligopoly?

    A few large firms dominate the market, products may be standardized or differentiated, there are high barriers to entry, and firms are interdependent (each firm's decisions affect rivals), often analyzed with game theory.

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