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# Technological improvements and reduced equipment costs have

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Senior Manager
Joined: 17 Sep 2016
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Re: Technological improvements and reduced equipment costs have  [#permalink]

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28 Dec 2016, 05:32
dear experts and mikemcgarry

this question does confused me a lot.

at first, I want to make sure whether my interpretation is correct.
from the prompt,
1/ technology improved, and reduced cost, then the efficiency of solar energy is improved.
2/ the threshold of solar energy = 35, unchanged, doesn't matter others change or not
3/ 35 = the target price of oil , no matter what the original price is, it will raised to 35 eventually.
4/ the increase of oil is to make solar energy more economical

honestly, I am not clear about the logic of the prompt.

next, the stem is want us to find one that can explain why cost-efficiency of solar power, but the threshold of solar power is the same as before.

I read the whole topic, but I am still mess what the clue of this CR.
I haven't gotten why increase in efficiency of oil will explain.

genuinely want your correct my interpretation and relationship between increased efficiency of oil and the unchanged threshold.

have a nice holiday.
>_~
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Re: Technological improvements and reduced equipment costs have  [#permalink]

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15 Jan 2017, 01:01
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.

OA:C...pls explain the meaning of the sentence,

But A is a close option.

My reason to kill A:

There are two things that make A less effective
1) The technology improvements and reduced equipment costs : as much lower for oil plants as they lower for solar plants. however, the solar energy has only one cost i.e. equipment/plant (sunlight is free)
2) Economic viability ( the words in bracket clearly say that oil prices will change ) : we need to know the constant costs which are the equipment or oil plant costs. The oil power generation has 2 costs a) oil b) equipment. Oil prices may go up or down, therefore the other factor must play the role.
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Joined: 17 May 2016
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Re: Technological improvements and reduced equipment costs have  [#permalink]

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28 Jan 2017, 07:29
Hi All,

I have read all the explanations and still not convinced that A is wrong, or maybe I do not understand the underlying approach.

Could you please explain what is wrong with this approach ?

Firstly, I assume the following :

Price of Solar Electricity = Price of Sun + Costs of Transformation Sun

Price of Oil-Fired Electricity = Price of Oil + Costs of Transformation Oil

From the Stem :

$$Price of Oil + 35 + Transformation Oil = Price of Sun + Transformation Sun$$

$$Price of Oil + Transformation Oil - Transformation Sun = Price of Sun + 35$$

$$Price of Oil + Transformation Oil - Transformation Sun = 35$$ — Since the Sun is free, Price of Sun = 0

$$(Price of Oil + Transformation Oil) - Transformation Sun[/color] = 35$$

However, after the reductions in Costs of the Transformation of sunlight to electricity, the equality has not changed — PARADOXE

$$(Price of Oil + Transformation Oil) - Transformation Sun = 35$$

So now we have two possibilities :

Price of Oil has decreased (Answer A) or Costs of Transformation have decreased (Answer C)

At this exact moment, you're stuck in an endless trap
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Re: Technological improvements and reduced equipment costs have  [#permalink]

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30 Apr 2017, 12:50
1
nickimonckom wrote:
Hi All,

I have read all the explanations and still not convinced that A is wrong, or maybe I do not understand the underlying approach.

Could you please explain what is wrong with this approach ?

Firstly, I assume the following :

Price of Solar Electricity = Price of Sun + Costs of Transformation Sun

Price of Oil-Fired Electricity = Price of Oil + Costs of Transformation Oil

From the Stem :

$$Price of Oil + 35 + Transformation Oil = Price of Sun + Transformation Sun$$

$$Price of Oil + Transformation Oil - Transformation Sun = Price of Sun + 35$$

$$Price of Oil + Transformation Oil - Transformation Sun = 35$$ — Since the Sun is free, Price of Sun = 0

$$(Price of Oil + Transformation Oil) - Transformation Sun[/color] = 35$$

However, after the reductions in Costs of the Transformation of sunlight to electricity, the equality has not changed — PARADOXE

$$(Price of Oil + Transformation Oil) - Transformation Sun = 35$$

So now we have two possibilities :

Price of Oil has decreased (Answer A) or Costs of Transformation have decreased (Answer C)

At this exact moment, you're stuck in an endless trap

Hi - Here's my 2 cents.

Point of economic viability is the point at which Cost of producing one unit of energy through Solar is equal to Cost of producing one unit of energy through Oil.
c_solar = c_OilBarrel + c_Processing.

Now, before efficiency improvements in solar energy production, our equation was -
c_solarBefore = 35 + c_ProcessingBefore
And after efficiency improvements in solar energy production, our equation has become -
c_solarAfter = 35 +c_ProcessingAfter.

The argument states that c_OilBarrel hasn't changed from 35 - The price of oil barrel at which energy via solar would be economically viable as compared to energy via oil. But, it does state that c_solarAfter is less than c_solarBefore. In such a case, the only way the equation can still hold is if c_ProcessingAfter decreases from c_ProcessingBefore.

You can see that economic viability actually DOES NOT take into account current oil prices.
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Re: Technological improvements and reduced equipment costs have  [#permalink]

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01 May 2017, 01:02
1

That's wrong. If Oil was 55 and not it's 20 then it's unchanged at $35 but that is because the price of oil dropped dramatically Manager Joined: 31 Dec 2016 Posts: 84 Re: Technological improvements and reduced equipment costs have [#permalink] ### Show Tags 06 Aug 2017, 10:13 Abhishek009 wrote: 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. I think what is most hilarious is watching you guys post your awful solutions. After reading a bunch here is why A is not as good as C A) The thing we are looking at is cost for a coal fired plant, which is made up of many things including the cost of oil. A Explains one factor. And if this is the case then it does explain the answer C) Just flat out tells us that coal plants are more efficient. So we know it's price has dropped. In A) we are making an assumption that no other costs have risen and C) We are not therefore the GMAT likes C. However, I disagree with a lot of the other solutions above who say this is a fancy math question. No A) Is clearly right too. Manager Joined: 31 Dec 2016 Posts: 84 Re: Technological improvements and reduced equipment costs have [#permalink] ### Show Tags 06 Aug 2017, 10:15 [quote="VeritasPrepKarishma" 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.[/quote] The question says the difference in price of solar minus oil is$35. It doesn't say that oil is under $35 you misread the question. Manager Joined: 31 Dec 2016 Posts: 84 Re: Technological improvements and reduced equipment costs have [#permalink] ### Show Tags 06 Aug 2017, 10:21 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. 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

Yes, I agree with this guy. Veritas Karishma is wrong and she made some bad assumptions that oil is under $35. Let's say the cost of solar starts the decade at$135 and the price of oil is at $100 and this is the only input cost. If the price of solar ends the decade at$100 and oil drops to $65 then it's remained unchanged!!!! However what if there are other input costs for oil? Clearly we know an oil plant can have other costs. We don't know what % oil makes up the cost. For C) We know that efficiency has increased. And we know the cost is unchanged at$35. Therefore if the price of oil went up \$700 we would know the efficiency compensated for this still. So this answer is enough to explain the answer

I believe C is better as it encompasses more of the answer than A
Re: Technological improvements and reduced equipment costs have &nbs [#permalink] 06 Aug 2017, 10:21

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