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Technological improvements and reduced equipment costs have

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 15 Oct 2013, 16:47
I will summarize Veritas' idea.
To be more economical, total costs of the solar-power plant are less than those of oil-fired plant.
Total costs of solar-power plant = Cost of sunlight (Zero) + Cost of infrastructure (called SP)
Total costs of oil-fired plant = Cost of oil + Cost of infra (called OF)
So we have: SP <= Cost of oil + OF; or SP - OF <= Cost of oil = Threshold
Past: SP - OF = 35 = Threshold
Present: because of the technological improvements, SP will decrease. If OF is unchanged, threshold will be decreased.
But Threshold (price of oil) is unchanged, so OF must be decreased with some reasons.
In all answers, we need find something which makes OF decrease.
The answer is C.

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 23 Mar 2014, 00:08
boeinz wrote:
How to kill 'A'?

Hi,A is incorrect. We are comparing two kinds of plants with the term "threshhold of viability for solar energy"which measures the difference. The price of oil at 35 dollars is just used to describe the difference. Oil of price is not the core issue, but the 35 dollars is. Here, the price of oil is a production element of fired plant. It is just a cost example of this kind of plant. Am I clear?

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New post 14 Jun 2014, 09:44
MICKEYXITIN wrote:
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.

Consider:-
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.
As per above statement
P = price per barrel of oil
dP = rise in price of oil required to make solar viable.

Argument says:-
"dP" is unchanged it does not comment anything about "P".

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 04 Aug 2014, 00:51
manishpal77899 wrote:
reply by gmatdetroyer.i find it helpful.pls read it carefully...


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...



But now you need to re-calculate the threshold values. Since efficiency has increased, we need to calculate threshold levels / unit of energy. In this case the new threshold will change which is counter to the argument.
So, the question is, how can we keep threshold constant when efficiency of solar based and oil-fired power plants has changed? :?:
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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 18 Feb 2015, 08:35
Hello from the GMAT Club VerbalBot!

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New post 09 Apr 2015, 18:01
The questions is very straight forward -

Economical viability for solar power is "price per barrel to which oil has to rise in order for new solar power plants to be more economical than new oil fired power plants"

Although the unit for this viability is $/barrel.

The comparison really is between

[cost to produce electricity in new oil fired power plant]/[cost to produce electricity in new solar power plants]

Therefore, even if when denominator goes down, and simultaneously numerator is also going down (option C), the economical viability remains constant.

The $/barrel calculated from the above statement is not related to the actual cost of oil/barrel.

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 03 Jun 2015, 09:23
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 03 Jun 2015, 09:59
piyushksharma wrote:
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.


Converting solar energy directly into electricity , cost-efficient in the last decade due to -

1. Technological improvements
2. Reduced equipment costs


Contra -

Rise in Price/Barrel (Oil ) { Fixed at $35 }=> More economic Viability of new solar power plants compared to New Oil Fired Plants Plants.

Thus effectiveness of new solar power plants depends on Rise in Price of Oil.

When price of oil rises people will tend to shift from Oil based power plants to Solar Power Plants. This has not happened till now despite Cost-Efficient production process , since Price of Oil has remain the same at $35.

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. - Not true.
B. The reduction in the cost of solar-power equipment has occurred despite increased raw material costsfor that equipment. - Absolutely not true.
C. Technological changes have increased the efficiency of oil-fired power plants. - True + Reduced Equipment Cost
D. Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants. - Out of scope.
E. When the price of oil increases, reserves of oil not previously worth exploiting become economically viable. - Out of scope.
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New post 07 Jun 2015, 08:20
VeritasPrepKarishma wrote:
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.


In the question stem, it says the price oil has to rise to, to make Solar a cheaper option. But, in your explanation, the final price of SP and Oil dervied energy is the same. Could u pls explain this?

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 08 Jun 2015, 07:08
nakul2905 wrote:
VeritasPrepKarishma wrote:
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.


In the question stem, it says the price oil has to rise to, to make Solar a cheaper option. But, in your explanation, the final price of SP and Oil dervied energy is the same. Could u pls explain this?


The price of oil has to rise (to $35) AS COMPARED TO ITS PREVIOUS VALUE ($25)

On the other hand,

the threshold of economic viability for solar power = Price of oil at which cost of producing electricity using oil is same as cost of producing electricity through solar power = $35
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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 01 Aug 2015, 09:11
VeritasPrepKarishma wrote:
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.


Sorry Guys, I just can´t agree with the reasons presented to eliminate A.

I Agree that C is a good choice, but A looks pretty fine to me:

Let´s imagine the cost for Solar energy is $60

Oil Production is $15 Plus the price of oil that is $10, so the oil would have to rise $35 in order for solar system be more effective tha oil´s.

If solar go down to $55, and oil price go do by $5 the difference remains the same...
the only thing that could make this choice "bad" is the word "dramatically"on it, but about that, it depends on the context since by my example the price of oil just went down by 50%!!

So, in my opinion this question just has two correct answer...

Thanks

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 01 Aug 2015, 11:40
pedrotupy wrote:
VeritasPrepKarishma wrote:
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.


Sorry Guys, I just can´t agree with the reasons presented to eliminate A.

I Agree that C is a good choice, but A looks pretty fine to me:

Let´s imagine the cost for Solar energy is $60

Oil Production is $15 Plus the price of oil that is $10, so the oil would have to rise $35 in order for solar system be more effective tha oil´s.

If solar go down to $55, and oil price go do by $5 the difference remains the same...
the only thing that could make this choice "bad" is the word "dramatically"on it, but about that, it depends on the context since by my example the price of oil just went down by 50%!!

So, in my opinion this question just has two correct answer...

Thanks



Without going into too much detail and analysis, it can easily been seen that the question is about cost efficiency and not simply about costs.

A talks about costs of oil but we DO NOT have any data about the cost-efficiency .Something is cheaper does not necessarily means that as it gets cheaper we will require less of it for more, making it more cost efficient.

C nails the efficiency angle stated in the argument.

I have always found that most of the GMAT questions can be done away without resorting to such quantitative analysis.If we need so much of quantitative analysis then in all probability we are missing the main point. I do find the quantitative based CR little difficult to understand . :?: :?: :?: As far as I have practiced,I am yet to find a question in the OG which require so much of quantitative analysis, though questions that require so much analysis are frequent in many prep materials.

Keeping things simple helps....

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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 02 Aug 2015, 23:50
pedrotupy wrote:

I Agree that C is a good choice, but A looks pretty fine to me:

Let´s imagine the cost for Solar energy is $60

Oil Production is $15 Plus the price of oil that is $10, so the oil would have to rise $35 in order for solar system be more effective tha oil´s.

If solar go down to $55, and oil price go do by $5 the difference remains the same...
the only thing that could make this choice "bad" is the word "dramatically"on it, but about that, it depends on the context since by my example the price of oil just went down by 50%!!

So, in my opinion this question just has two correct answer...

Thanks


Let me point out here that $35 is not the amount BY WHICH oil price should rise. It is the amount TO WHICH the oil price should rise i.e. the price of oil should become $35 - this price is the threshold of economic viability. This $35 is calculated as

(Infra price per unit in solar plant) - (Infra price per unit in oil plant) = $35

$35 is the cost of oil which will make cost of per unit of electricity same in both plants.

The problem is that this hypothetical price of oil which shows the threshold of economic viability of solar power is not going down. This hypothetical price has nothing to do with the ACTUAL PRICE of oil. Whatever the actual price is, it should go to $35 to make solar power viable. Hence (A) is irrelevant.
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New post 04 Nov 2015, 13:40
Note that $35 is an absolute value. If Solar energy plants maintained same efficiency as before, and oil prices were to drop significantly, the threshold price will remain same. It is the price to which it must rise in order for Solar power to become more economical.

However, if efficiency of solar power plants is improved, this 35$ value drops, thus only way to counteract this issue, is improvement in Oil plant efficiency.

A lot of folks(like me) think the threshold is the difference between current Solar power prices and current Oil prices, which it is NOT.

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New post 21 Nov 2015, 17:35
VeritasPrepKarishma wrote:
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.



Thank you for the very detailed explanation - unfortunately I am as dense as a rock and am having a hard time getting why A is not correct.

Scenario:
Solar system costs $100
Oil system costs $65 (assume costs for oil system infrastructure is non-significant, so the cost is entirely oil price, which is at $65)
Economic viability threshold $35

After improvements:
Economic viability threshold unchanged at $35
Solar system costs $90
Implied oil system costs $55 --> the implied oil system cost dropped by $5

While it could be that (c) oil system became more efficient, or it could be (a) oil price decreased (i.e., from $65 to $55), no??

Anyone who can enlighten me I will give a Kudo and be eternally grateful..... thanks!
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New post 21 Nov 2015, 18:21
Threshold is not the difference between oil prices and solar power energy price. It is a fixed absolute value. If it were, the bracketed statement would have read "that is, the price per barrel BY which oil would have to rise in order for new solar power plants to be more
economical than new oil-fired power plants
"

Very very subtle difference

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New post 21 Nov 2015, 18:29
youneverknow wrote:
Threshold is not the difference between oil prices and solar power energy price. It is a fixed absolute value. If it were, the bracketed statement would have read "that is, the price per barrel BY which oil would have to rise in order for new solar power plants to be more
economical than new oil-fired power plants
"

Very very subtle difference


I understand that the economic threshold is describing the cost difference between the solar plants and the fired powered oil plants. Assuming the cost of fire powered oil plan is driven almost entirely by oil, why can't the decline in oil be the reason for why the economic threshold stayed the same?

Clearly having an unnecessary amount of trouble with this problem lol ......
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Threshold is simply a dollar value to which oil prices must rise.. If efficiency of Solar Power Plants were to remain same as before, and oil prices were to drop significantly (with same constant oil power plant efficiency as before) , the threshold will remain the same. This is why I stressed on the to vs. by difference in the question's definition of threshold. It is the price TO which prices must rise.

Take for example, threshold value is 35$.
Now if oil prices are 20$ today, it has to rise to 35$. If it is 30$, it has to rise to 35$. If it falls to 1$, it still has to rise to 35$. It is a standard irrespective of current oil trends. If it were written "the price BY which oil prices...", it would mean the threshold would attain values 15$,5$,34$ assuming solar prices are at 35$ in the above example.

Another example: Suppose Solar power plants remain at same efficiency, but Oil plants improve theirs. Now oil would be produced at much cheaper rates, so its economic viability will rise.. In other words, economic viability of solar power plant with respect to oil plant will reduce(since now it is much preferable to produce oil generated power). This viability is quantified by 'threshold'. Since Oil is now much more 'viable' source of energy compared with Solar power, threshold will now rise.

However, a much preferable approach to solving this question is by eliminating all other options, which is possible if you are able to spot that subtle difference 'to and by' which changes the meaning of threshold entirely if they are used interchangeably.

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New post 22 Nov 2015, 17:45
youneverknow wrote:
Threshold is simply a dollar value to which oil prices must rise.. If efficiency of Solar Power Plants were to remain same as before, and oil prices were to drop significantly (with same constant oil power plant efficiency as before) , the threshold will remain the same. This is why I stressed on the to vs. by difference in the question's definition of threshold. It is the price TO which prices must rise.

Take for example, threshold value is 35$.
Now if oil prices are 20$ today, it has to rise to 35$. If it is 30$, it has to rise to 35$. If it falls to 1$, it still has to rise to 35$. It is a standard irrespective of current oil trends. If it were written "the price BY which oil prices...", it would mean the threshold would attain values 15$,5$,34$ assuming solar prices are at 35$ in the above example.

Another example: Suppose Solar power plants remain at same efficiency, but Oil plants improve theirs. Now oil would be produced at much cheaper rates, so its economic viability will rise.. In other words, economic viability of solar power plant with respect to oil plant will reduce(since now it is much preferable to produce oil generated power). This viability is quantified by 'threshold'. Since Oil is now much more 'viable' source of energy compared with Solar power, threshold will now rise.

However, a much preferable approach to solving this question is by eliminating all other options, which is possible if you are able to spot that subtle difference 'to and by' which changes the meaning of threshold entirely if they are used interchangeably.


Wow I see it now, $35 is the price oil must rise to and not the amount oil price must increase - thank you so much. I know it's useless to complain but I must say it's terrible that the correct answer hinges on this subtle difference rather than logic. But I guess the verbal also tests your ability to read, which I clearly am having issues with.

Anyway, +1 thank you! =)
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Re: Technological improvements and reduced equipment costs have [#permalink]

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New post 03 Jan 2016, 15:38
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,


The latest developments in the CR area on GMAT is just annoying. It seems that the questions are just made more complex by language complexity. Old questions from OG13 were n times better than the new ones. Thanks GMAT, it's "very fair" towards non-native speakers.....

In this type of questions, we need to connect both parts of paradox sothat they can coexist. Answer choices that take only one part of the paradox into consideration are OUT.

(A) The cost of oil has fallen dramatically --> This one is the hardest one among the answer choices given. I'll just highlight one part of the argument The price per barrel to which oil would have to rise. I think the highlighted part is the key to eliminate (A). So, the mentioned price per barel is fixed/constant regardless of the oil price. Whether actual oil price is 1 or 20 it must rise to 35$ (our fixed price)
(C) Technological changes have increased the efficiency of oil-fired power plants --> Derived on the answer choice by POE. I don't understand why this one is correct (may be bcs of poor english skills, but I know why the other answer choices are incorrect... :)

(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment. --> This info doesn't help us to resolve the paradox. It gives us just some useless info about what we already know.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants. --> It doesn't help us to resolve the paradox.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable --> We are not interested in the change in price of oil (see expl. for answer choice A)
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