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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 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.

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

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New post 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.

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New post 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.

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New post 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.

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New post 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?

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New post 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.

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New post 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.

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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.
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New post 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.

please ~~~~

have a nice holiday.
>_~

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

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New post 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.

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



Answer is C.

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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New post 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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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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Since the efficiency of the solar power plants has increased making the solar energy far more cost-efficient, the economic viability of solar power should have decreased from $35 which apparently hasn’t. This could be because the efficiency of the oil-fired power plants might also have increased by a similar magnitude.

A) The cost of the oil has fallen dramatically; it’s a good start. But as nothing has been mentioned about the efficiency of the oil-fired power plants, we can assume that the efficiency is where it was. So, it will take the fire plant same volume of oil to produce a unit of electricity. Now, there are multiple components involved in producing electricity of which price of the oil is a part. Assuming all the other components remain the same, it makes although viable but not a very strong point that the price of oil single-handedly brought down the price of producing electricity from oil-fired plants to match up to the positive consequences of technological advancements cast upon the solar power plants. In case there’s no stronger option, we will select this option.

B) This doesn’t address anything about the oil.

C) Since the efficiency of the oil-fired power plants has also increased, there’s a fair possibility that the technological advances in the solar power sector couldn’t take the solar power production to a vantage point with respect to oil-fired power plants. This point is strong compared to option A as it addresses the entire system rather than a single component of the system.

D) Deviating from the path.

E) Can’t figure out how it is connected to the problem.

Thus, option C.

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New post 29 May 2017, 12:35
Let P be the TARGET PRICE of an oil barrel. P=35
Now, I think some people confuse the term TARGET PRICE and think the price should rise in 35$ from whatever price it is now, if that was true A could be correct because if the price needs to go up by 35$ before and now as well, regardless the fact SOLAR became more efficient (=cheaper) then it could be explained by oil price decrease.

HOWEVER, as I said this is a TARGET PRICE of a barrel, this target price has nothing to do with how much oil cost, let oil be completely free because Donald Trump made a deal with the Saudis, it still need to cost 35 for the SOLAR to electricity process be cheaper. How comes? because processing oil into electricity became cheaper for example.

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New post 02 Jun 2017, 12:17
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.



But it says, the price per barrel has to go up by $35 dollar to make Solar power more economical.

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

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New post 25 Jul 2017, 22:17
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,


I see a lot of quantitative mumbo-jumbo thrown out here to explain things. Looking at these explanations, I tend to ponder whether CR is testing our Verbal Reasoning or Quantitative Reasoning. If it's the later then why do we have Quantitative reasoning as a separate section. Why not mix and match the sections and its questions?! :roll: :roll: Wouldn't it be best if we understand the problem statement purely from verbal reasoning perspective rather than convoluting the reasoning to such an extent that the takeaway is hard to apply in actual exam conditions?

The phrase in highlighted above caught my eye. Economic Viability is applicable for future or new Oil Power Plants and not the existing one. Hence current oil prices even though might have fallen dramatically, has no bearing on Economic Viability as defined in the question stem. Hence A is out and C remains.

I hope this helps in simplifying the confusion for some.
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New post 06 Aug 2017, 10:03
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.


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

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

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New post 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.

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

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New post 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.

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

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New post 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.


[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


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

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Re: Technological improvements and reduced equipment costs have   [#permalink] 06 Aug 2017, 10:21

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