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# Technological improvements and reduced equipment costs have

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Senior Manager
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Technological improvements and reduced equipment costs have [#permalink]  21 Aug 2009, 11:46
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153. Technological improvements and reduced equipment costs have made converting solar energy directly into
electricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power
(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more
economical than new oil-fired power plants) is unchanged at thirty-five dollars.
Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has
not decreased its threshold of economic viability?
(A) The cost of oil has fallen dramatically.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs
for that equipment.
(C) Technological changes have increased the efficiency of oil-fired power plants.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically
viable.

[Reveal] Spoiler:
OA:C...pls explain the meaning of the sentence,
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Re: Technological improvements and reduced equipment costs have [#permalink]  20 Jan 2012, 02:10
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rohansherry wrote:
153. Technological improvements and reduced equipment costs have made converting solar energy directly into
electricity far more cost-efficient in the last decade. However, the threshold of economic viability for solar power
(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more
economical than new oil-fired power plants) is unchanged at thirty-five dollars.
Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has
not decreased its threshold of economic viability?
(A) The cost of oil has fallen dramatically.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs
for that equipment.
(C) Technological changes have increased the efficiency of oil-fired power plants.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically
viable.

[Reveal] Spoiler:
OA:C...pls explain the meaning of the sentence,

It is a good tricky CR question. People with a quantitative bent of mind would love it, I am sure.
Let me put some numbers here to make it clearer. You need the numbers to understand that a paradox exists. Once you do understand that, resolving it is very simple.

Sunlight is free. Infra needed to convert it to electricity is expensive. Say for every one unit of electricity, you need to spend $50 in a solar power plant. Oil is expensive. Infra needed to convert it to electricity, not so much. Say for every one unit of electricity, you need to spend$40 in an oil fired power plant. Say, the split here is $25 +$15 ($25 is the cost of oil used and$15 is cost of infra for a unit of electricity).

Oil based electricity is cheaper. If the cost of oil rises by $10 to$35, solar power will become viable.
This $35 = the threshold of economic viability for solar power = the price per barrel to which oil would have to rise (mind you, this isn't the actual price of oil) What happens if you need to spend only$45 in a solar power plant for a unit of electricity? Would you expect 'the threshold of economic viability for solar power' to go to 30? Yes! Now, for solar viability, 'cost of oil + cost of infra in oil power plant' should be only $45. 'Cost of infra in oil power plant' = 15 so we need the oil to go up to$30 only. That will make solar power plants viable. So the threshold of economic viability should decrease.

But the threshold of economic viability for solar power is still $35! It doesn't decrease. That is the paradox! How do you resolve it? By saying that 'Cost of infra in oil power plant' has also gone down by$5 and is only $10 now. This is what the scene is like now: Sunlight is free. Infra needed to convert it to electricity is expensive. For every one unit of electricity, you need to spend$45 in a solar power plant.

Oil is expensive. Infra needed to convert it to electricity, not so much. For every one unit of electricity, you need to spend $35 in an oil fired power plant. The split now is$25 + $10 ($25 is the cost of oil used and $10 is cost of infra for a unit of electricity). You still need the oil price to go up to$35 so that cost of electricity generation in oil power plant is also $45. So you explained the paradox by saying that "Technological changes have increased the efficiency of oil-fired power plants." So, option (C) is correct. If you think about it now, the actual price of the oil has nothing to do with 'the threshold of economic viability for solar power'. This threshold is$35 so you need the oil to go up to $35. Whether the actual price of oil is$10 or $15 or$20, it doesn't matter. It still needs to go up to $35 for solar viability. So option (A) is incorrect. _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

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Re: Technological improvements and reduced equipment [#permalink]  21 Aug 2009, 13:06
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C) Correct. For Solar plants to become more viable, oil price has to go up so that electricity
generated by Oil plants become costlier than Solar plants because as Oil-fire based technology
also evolved. So if oil price doesn't go above $35, oil based electricity will be cheaper. Also in "(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants)", author is comparing Solar plants to new oil based plants. -STL Manager Status: what we want to do, do it as soon as possible Joined: 24 May 2010 Posts: 114 Location: Vietnam WE 1: 5.0 Followers: 2 Kudos [?]: 43 [5] , given: 315 Re: Technological improvements and reduced equipment [#permalink] 08 Mar 2011, 20:43 5 This post received KUDOS noboru wrote: boeinz wrote: How to kill 'A'? Same here. I agree with C; but A is also correct. Could anybody clarify? A is incorrect because the premise also said that the the price per oil barrel is unchanged (=$35). We cannot change the premise of the argument. A is counter-fact in saying that oil price has fallen.
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Re: Technological improvements and reduced equipment [#permalink]  12 Sep 2011, 02:32
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let us say earlier it used to cost $50 to get 1 unit of power using solar power system....and one barrel of oil costing$20 produced 1 unit of energy using oil fired system....

oil wud have to rise to $50 per barrel so that we cud switch to solar power...or solar power wud have to fall to$20 to make the switch economically viable...

Now if Oil prices have fallen dramatically!!!
we were getting 1 unit from $20 of oil...lets say oil prices have fallen to$5 per barrel .... and now we are getting 1 unit from oil power for $5 ... Also solar power has become more efficient...say now we are getting 2 units of energy from$ 50 using solar power...this means 1 unit for $25 ... in this case solar power wud have to fall to$5 or oil wud have to rise to $25 .... SO you can see THRESHOLD HAS CHANGED....BUT ACCORDING TO STIMULI THRESHOLD REMAINS UNCHANGED... sO wat wud have happened..?? now with increased efficiency..we can get 2 units of energy from solar power and it still costs us$50 ....

As the stimuli says the threshold remains the same....
wat if oil power plants have become efficient ... earlier we were getting 1 unit from $20 ...NOW WE GET 2 UNITS USING$20 ...???

in this case..either solar power drops to $20 or oil rises to$50 .... threshold remains the same...

Important thing in this question is THRESHOLD....thats wat makes it confusing....hope it helps...
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Re: Technological improvements and reduced equipment [#permalink]  26 Aug 2009, 00:49
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How to kill 'A'?
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Re: Technological improvements and reduced equipment [#permalink]  04 Jan 2011, 15:27
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mundasingh123 wrote:
Can u pls reveal the source ?

I've seen this one on GMATPrep.
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Re: Technological improvements and reduced equipment [#permalink]  04 Nov 2011, 07:15
1
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Following can be used to kill A,

Threshold did not change for NEW oil-fired plant
(implicit Threshold probably did change for OLD oil-fired plant)

Combine both and one can see that it can only be explained by increased efficiency of NEW oil-fired plant and not by lowered price of oil
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Re: Technological improvements and reduced equipment [#permalink]  22 Aug 2009, 06:57
lalmanistl wrote:
C) Correct. For Solar plants to become more viable, oil price has to go up so that electricity
generated by Oil plants become costlier than Solar plants because as Oil-fire based technology
also evolved. So if oil price doesn't go above $35, oil based electricity will be cheaper. Also in "(that is, the price per barrel to which oil would have to rise in order for new solar power plants to be more economical than new oil-fired power plants)", author is comparing Solar plants to new oil based plants. -STL Ohh....i shuldnt miss this kinfd of ques.. ya thanks for explaining.. And congrtas for your first Kudos SVP Joined: 16 Jul 2009 Posts: 1634 Schools: CBS WE 1: 4 years (Consulting) Followers: 37 Kudos [?]: 534 [0], given: 2 Re: Technological improvements and reduced equipment [#permalink] 21 Jul 2010, 10:03 boeinz wrote: How to kill 'A'? Same here. I agree with C; but A is also correct. Could anybody clarify? _________________ The sky is the limit 800 is the limit GMAT Club Premium Membership - big benefits and savings SVP Joined: 16 Jul 2009 Posts: 1634 Schools: CBS WE 1: 4 years (Consulting) Followers: 37 Kudos [?]: 534 [0], given: 2 Re: Technological improvements and reduced equipment [#permalink] 03 Jan 2011, 10:54 1 This post was BOOKMARKED noboru wrote: boeinz wrote: How to kill 'A'? Same here. I agree with C; but A is also correct. Could anybody clarify? nobody is going to clarify? _________________ The sky is the limit 800 is the limit GMAT Club Premium Membership - big benefits and savings Verbal Forum Moderator Joined: 31 Jan 2010 Posts: 500 WE 1: 4 years Tech Followers: 11 Kudos [?]: 101 [0], given: 149 Re: Technological improvements and reduced equipment [#permalink] 04 Jan 2011, 04:32 Can u pls reveal the source ? _________________ My Post Invites Discussions not answers Try to give back something to the Forum.I want your explanations, right now ! Please let me know your opinion about the Chandigarh Gmat Centrehttp://gmatclub.com/forum/gmat-experience-at-chandigarh-india-centre-111830.html Manager Joined: 26 Mar 2007 Posts: 87 Concentration: General Management, Leadership Schools: Thunderbird '15 Followers: 1 Kudos [?]: 78 [0], given: 8 Re: Technological improvements and reduced equipment [#permalink] 06 Jan 2011, 03:34 Resolve the paradox question. I think it is C Manager Joined: 26 Mar 2007 Posts: 87 Concentration: General Management, Leadership Schools: Thunderbird '15 Followers: 1 Kudos [?]: 78 [0], given: 8 Re: Technological improvements and reduced equipment [#permalink] 11 Jan 2011, 00:12 C sounds better Manager Status: what we want to do, do it as soon as possible Joined: 24 May 2010 Posts: 114 Location: Vietnam WE 1: 5.0 Followers: 2 Kudos [?]: 43 [0], given: 315 Re: Technological improvements and reduced equipment [#permalink] 13 Sep 2011, 01:20 firstly, the argument compares the efficiency of Solar energy manufaction nowadays with the solar energy manufaction last decades and concludes that solar energy today is created more efficiently than the past solar energy did. Second, it raises the paradox that why the efficiency of solar energy comparing with efficiency of other kinds energy like oil is unchanged (through a blah blah blah measure called threshold or oil price rise whatever) ??? The reason that other energy like oil is also improved in technical is a possible concilement for the paradox which underminds the author's presumtion. (A) does not give any resolution for paradox when saying that oil price is fallen. If oil price falls rather than increases, the efficiency of solar energy operation is decreased relatively with other kind of energy while the premises also said that the connection between these two energy is unchange though a decade by giving evidence of threshold viability of 35$.
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Re: Technological improvements and reduced equipment costs have [#permalink]  09 Nov 2011, 01:42
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Re: Technological improvements and reduced equipment costs have [#permalink]  09 Nov 2011, 01:58
C looks the best option
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Re: Technological improvements and reduced equipment costs have [#permalink]  10 Nov 2011, 01:19
Tough one!!

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Re: Technological improvements and reduced equipment costs have [#permalink]  13 Nov 2011, 08:40
I chose (C). The approach to solve this question is the same with the question about recycle and new paper. The solar energy industry have its own advance in technology that make the price of solar energy reduce.
But the oil industry also have its own advance in technology. Together, both two price of each kind fall equally. the gap is unchange.
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Re: Technological improvements and reduced equipment [#permalink]  19 Jan 2012, 17:18
noboru wrote:
noboru wrote:
boeinz wrote:
How to kill 'A'?

Same here.
I agree with C; but A is also correct.
Could anybody clarify?

nobody is going to clarify?

I will try to explain how to kill A.

Initially we have 2 power plants: oil-fired and solar.
Now, technological improvements and reduced equipment costs brought down solar-power plants cost.
But oil-fired power plants are still economical because the threshold stuck at some value.

It can happen only either oil price has come down or similar improvements happened in oil-powered plants as well.

But as the question is to select something that helps explain most, C is the right answer.

A is not answer only because E is present.
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Re: Technological improvements and reduced equipment   [#permalink] 19 Jan 2012, 17:18

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