It is currently 20 Mar 2018, 23:41

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Events & Promotions

###### Events & Promotions in June
Open Detailed Calendar

# Technological improvements and reduced equipment costs have

 post reply Question banks Downloads My Bookmarks Reviews Important topics
Author Message
TAGS:

### Hide Tags

Intern
Joined: 23 Apr 2014
Posts: 4
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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?
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 7996
Location: Pune, India
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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
_________________

Karishma
Veritas Prep | GMAT Instructor
My Blog

Get started with Veritas Prep GMAT On Demand for \$199

Veritas Prep Reviews

Intern
Joined: 24 Apr 2015
Posts: 20
GMAT 1: 680 Q47 V35
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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
Senior Manager
Joined: 01 Nov 2013
Posts: 335
GMAT 1: 690 Q45 V39
WE: General Management (Energy and Utilities)
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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....

I donot mind Kudos
_________________

Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.

I hated every minute of training, but I said, 'Don't quit. Suffer now and live the rest of your life as a champion.-Mohammad Ali

Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 7996
Location: Pune, India
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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.
_________________

Karishma
Veritas Prep | GMAT Instructor
My Blog

Get started with Veritas Prep GMAT On Demand for \$199

Veritas Prep Reviews

Intern
Joined: 13 Sep 2015
Posts: 13
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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.
Manager
Joined: 05 Aug 2015
Posts: 50
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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!
_________________

Working towards 25 Kudos for the Gmatclub Exams - help meee I'm poooor

Intern
Joined: 13 Sep 2015
Posts: 13
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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
Manager
Joined: 05 Aug 2015
Posts: 50
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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 ......
_________________

Working towards 25 Kudos for the Gmatclub Exams - help meee I'm poooor

Intern
Joined: 13 Sep 2015
Posts: 13
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

21 Nov 2015, 20:37
1
This post received
KUDOS
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.
Manager
Joined: 05 Aug 2015
Posts: 50
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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! =)
_________________

Working towards 25 Kudos for the Gmatclub Exams - help meee I'm poooor

Director
Joined: 10 Mar 2013
Posts: 581
Location: Germany
Concentration: Finance, Entrepreneurship
GMAT 1: 580 Q46 V24
GPA: 3.88
WE: Information Technology (Consulting)
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

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)
_________________

When you’re up, your friends know who you are. When you’re down, you know who your friends are.

Share some Kudos, if my posts help you. Thank you !

800Score ONLY QUANT CAT1 51, CAT2 50, CAT3 50
GMAT PREP 670
MGMAT CAT 630
KAPLAN CAT 660

Manager
Joined: 05 Aug 2015
Posts: 50
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

04 May 2016, 22:41
People who are confused by why A isn't right, HERE IS YOUR ANSWER:

Read carefully again: "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"

Note, this is saying "price to which oil would have to rise" -- this means oil would have to rise TO \$35 for Solar to be cheaper than Oil-fired plants. This does not mean oil would have to rise BY \$35.

Example:
Solar Power Cost: \$50
Oil Power Cost: \$50 (Oil per barrel costs \$35 + Oil processing cost \$15)

Solar Power Cost (post technological improvement): \$40
Oil Power Cost: \$40 (Oil per barrel costs \$35 + oil processing cost \$X) -- note \$X MUST BE LOWER for total Oil Power cost to be \$40 AND oil per barrel to remain unchanged at \$35. So, \$X is \$5 -- oil processing cost is lower --> answer is C.

Kudos if this helps you!
_________________

Working towards 25 Kudos for the Gmatclub Exams - help meee I'm poooor

Intern
Joined: 20 May 2016
Posts: 1
Concentration: General Management, Leadership
GMAT 1: 640 Q49 V29
GPA: 3.76
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

21 May 2016, 06:49
I had a difficult time with this one, especially understanding why A is incorrect. After spending (probably too much) time thinking about this, I think this is why:

- A threshold determines at which point (expressed in gas price) the technology is economically viable
- The actual gas price allows you to compare it with the threshold (also defined as gas price) and to make decision on whether the technology is economically viable

Therefore, the choice A) does not allow us to evaluate the threshold itself, but may allow us to evaluate the current economical viability of the technology.

"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?" is not asking whether the technology is viable but why the threshold remained unchanged despite the increased cost-efficiency of solar power.
Intern
Joined: 09 Oct 2015
Posts: 48
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

23 Jun 2016, 03:11
egmat Can you please take a stab at this ? I have searched multiple forums and everybody is quoting different mathematical numbers to prove A wrong but logically if the prices of oil do fall while we have more efficient solar plants I would like to be believe that can be a plausible explanation to unchanged economic viability.

However my only explanation to choice 'A' being incorrect is that it is against the premise that the oil prices are unchanged ( which means no increase or decrease). I have only found one answer stating this and nobody else has ever even hinted towards this so I wanted to know if this is indeed a possible answer. Looking forward to your help.
Manager
Joined: 01 Sep 2016
Posts: 114
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

14 Sep 2016, 08:21
I had chosen C.But was not sure.Thanks for the explanation

tuanquang269 wrote:
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.
Manager
Joined: 21 Apr 2016
Posts: 195
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

24 Sep 2016, 18:37
(C) says technological changes have increased the efficiency of oil-fired power plants.

Should this be read as in terms of cost?

Shouldn't the option suggest cost-efficiency just as the question stem does in the context of solar energy?
Intern
Joined: 13 Jul 2016
Posts: 48
GMAT 1: 770 Q50 V44
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

10 Oct 2016, 04:50
shikhar 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

y answer was A

I think the main confusion is between A and C.

Given: threshold of economic viability for solar power = 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 = \$35

To reach economic viability
Price of x unit of solar energy = Price of x unit of "oil energy" at the hypothetical rate that oil will have to rise to
Price of x unit of solar energy = Price of 1 barrel of oil that oil will have to rise to * amount of oil required to produce X units of energy

Now the first term in the above equation has decreased and the second term is constant at \$ 35, so the third term has to decrease the keep the equation balanced.
=> efficiency of oil fired power plants has to increase. which is C

The second term is a hypothetical figure that is calculated based on the first and third term. It is not dependent on the current price of the oil. Hence A is wrong.
Intern
Joined: 05 Jun 2016
Posts: 30
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

29 Nov 2016, 12:24
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.

Hello.

Can you please explain what is wrong with (E)? If, every time price of oil goes up, and previous reserves that were not available for use end up becoming available, it suggests that the oil manufacturers have been successful in manipulating the supply, and therefore the price of oil to keep it low enough to make solar energy not economically feasible.
Veritas Prep GMAT Instructor
Joined: 16 Oct 2010
Posts: 7996
Location: Pune, India
Re: Technological improvements and reduced equipment costs have [#permalink]

### Show Tags

30 Nov 2016, 01:10
1
This post received
KUDOS
Expert's post
gatreya14 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.

Hello.

Can you please explain what is wrong with (E)? If, every time price of oil goes up, and previous reserves that were not available for use end up becoming available, it suggests that the oil manufacturers have been successful in manipulating the supply, and therefore the price of oil to keep it low enough to make solar energy not economically feasible.

(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically
viable.

What could be the implication of (E)? That the extra oil availability would keep actual oil prices low.

The point is that actual price of oil has NOTHING to do with 'the threshold of economic viability for solar power'. For solar viability, the OIL PRICE needs to GO UP TO \$35. This \$35 is the threshold of economic viability. It doesn't matter what the actual cost of oil is right now.
_________________

Karishma
Veritas Prep | GMAT Instructor
My Blog

Get started with Veritas Prep GMAT On Demand for \$199

Veritas Prep Reviews

Re: Technological improvements and reduced equipment costs have   [#permalink] 30 Nov 2016, 01:10

Go to page   Previous    1   2   3   4    Next  [ 72 posts ]

Display posts from previous: Sort by

# Technological improvements and reduced equipment costs have

 post reply Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.