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705-805 Level|   Resolve Paradox|               
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Technological improvements and reduced equipment costs have made conve 10 Jul 2013, 09:02
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Hi Nikhil,

No - we're not assuming anything else when we see the answer.

The correct answer is C.

Think about it in any business context - if you improve your efficiency, the thing that counteracts that is your competitor improving its. Meaning you get no where...

This logically works here, and makes C correct.

Does that make sense
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Technological improvements and reduced equipment costs have made conve 11 Jul 2013, 01:09
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Hi Nikhil,

No - we're not assuming anything else when we see the answer.

The correct answer is C.

Think about it in any business context - if you improve your efficiency, the thing that counteracts that is your competitor improving its. Meaning you get no where...

This logically works here, and makes C correct.

Does that make sense
Show more

Hey, thank you for the explanation. But I was actually wondering if you could explain to me why is A wrong? On what grounds do we consider A incorrect or is it just about picking which is more relevant from A and C?
At the same time, can you tell me where am I going wrong here? In my eyes, a decrease in Oil price would also keep the economic viability unchanged right?
Moreover, In C ain't we assuming that although efficiency of the plants has increased, the cost of raw materials or production is still the same? Doesn't this assumption deem the answer incorrect?
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Technological improvements and reduced equipment costs have made conve 11 Jul 2013, 01:19
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Hi Nikhil,

No - we're not assuming anything else when we see the answer.

The correct answer is C.

Think about it in any business context - if you improve your efficiency, the thing that counteracts that is your competitor improving its. Meaning you get no where...

This logically works here, and makes C correct.

Does that make sense

Hey, thank you for the explanation. But I was actually wondering if you could explain to me why is A wrong? On what grounds do we consider A incorrect or is it just about picking which is more relevant from A and C?
At the same time, can you tell me where am I going wrong here? In my eyes, a decrease in Oil price would also keep the economic viability unchanged right?
Moreover, In C ain't we assuming that although efficiency of the plants has increased, the cost of raw materials or production is still the same? Doesn't this assumption deem the answer incorrect?
Show more


No, it is not about picking the more relevant option. A is incorrect. Here is the explanation as I gave on another thread of this question:

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.
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Technological improvements and reduced equipment costs have made conve 03 Jun 2015, 09:59
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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.
Show more

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

1. Technological improvements
2. Reduced equipment costs

Contra -

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

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

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

Which of the following, if true, does most to help explain why the increased cost-efficiency of solar power has not decreased its threshold of economic viability?

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


Show 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.
Show more

In the question stem, it says the price oil has to rise to, to make Solar a cheaper option. But, in your explanation, the final price of SP and Oil dervied energy is the same. Could u pls explain this?
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Technological improvements and reduced equipment costs have made conve 08 Jun 2015, 07:08
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rohansherry
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.


Show 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?
Show more

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

On the other hand,

the threshold of economic viability for solar power = Price of oil at which cost of producing electricity using oil is same as cost of producing electricity through solar power = $35
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Technological improvements and reduced equipment costs have made conve 01 Aug 2015, 09:11
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VeritasPrepKarishma
rohansherry
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.


Show 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.
Show more

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

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

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

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

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

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

Thanks
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pedrotupy


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
Show more

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

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

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

The problem is that this hypothetical price of oil which shows the threshold of economic viability of solar power is not going down. This hypothetical price has nothing to do with the ACTUAL PRICE of oil. Whatever the actual price is, it should go to $35 to make solar power viable. Hence (A) is irrelevant.
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Technological improvements and reduced equipment costs have made conve 29 Nov 2016, 12:24
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rohansherry
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.


Show 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.
Show more

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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Technological improvements and reduced equipment costs have made conve 30 Nov 2016, 01:10
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rohansherry
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.


Show 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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(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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Verbal Question of The Day: Day 94: Critical Reasoning


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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.


Every question of the day will be followed by an expert reply by GMATNinja in 12-15 hours. Stay tuned! Post your answers and explanations to earn kudos.
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I will say it is C.

What we have.
1. Technology improved. Cost of equipment reduced ---> Solar plant became more efficient.
2. Treshold stayed unchaged (35 dollars).

Prethinking.
The main part here is to understand exactly what does "treshold of economic viability" mean.
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.
Now look at word "new" (I have written "new" in bold). It is a prompt given to us. That we have to compare solar plants with new technology with oil-plants with new technology. There is no explicit mentioning in the text. But "new" gives us this understanding.
Now lets consider some situations.
1. We have old solar plant and old oil plant. Treshold = 35. (Todays oil cost is 25. Oil plant is more economical) When barrel of oil costs 35, these two plants are equally economical.
2. We have new (technology, equipment) solar plant and old oil plant. (Todays oil cost is 25. Oil plant is more economical) Treshold != 35. It is reduced. Maybe it is 30 now. Why? Because solar plant has new technology and reduced cost of equipment - it is more eficient now. So the oil has to increase in prise less than in the first case these 2 kinds of plants to become equally economical.
3. We have old solar plant and old oil plant. Treshold = 35.
Price of oil increases to 40. Does it change the treshold? NO! It only makes solar plant more economical than oil plant.
Price of oil decreases to 20. Does it change the treshold? NO! It only makes solar plant even less economical than it was before.
4. We have new solar plant and new oil plant. Treshold = 35. It did not change. Because both plants increased their efficency (new technology, cheap equipment).
It seems like it is the answer we are looking for.

Now lets check the options.

(A) The cost of oil has fallen dramatically. We discussed it above. Oil price does not affect treshold. It only changes the level of "economical". Out.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment. It is not relevant in this case. Does not give information abouct any connection of solar and oil plants.
(C) Technological changes have increased the efficiency of oil-fired power plants. Nice. Our case №4.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants. Out os scope.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable. Out of scope.
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Technological improvements and reduced equipment costs have made conve 18 Oct 2017, 18:23
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I think this question is a bit too hard, even at the 800 level. One has to gauge the definition of "economic viability" under a minute and no the explanation in brackets doesn't help much but confuses the reader more.

In this question, economic viability is actually defined as:

Oil is more Efficient ------$35------ Solar is more Efficient

Threshold is NOT a range. It's a mark on a line.

Because one cannot readily compare efficiency of 2 processes, the question poses $35 as an arbitrary unit of measurement to compare the 2. In particular the statement " the price per barrel to which oil would have to rise in" is tricky as HELL. "Rise to" (the to before which) basically means goes above $35. Reading this..most of us thought it's a range when it's basically a mark on the line.

Knowing this, the question tells us that solar has become more efficient, so the line should look like:

Oil is more Efficient ------$30 (or anything less than $35)------ Solar is more Efficient

Because solar is now more competitive, the threshold decreases. Before oil can be at $34 and still be the better choice, now it has to be at $29 to be the better choice - again due to the increased competitiveness of solar. But the question tells us that the threshold stays at $35. We know that if Solar++ efficiency then threshold decreases, thus if Oi++ efficiency the threshold increases! Most importantly, ONLY efficiency can CHANGE the threshold.



Now let's fly past by the choices:

(A) The cost of oil has fallen dramatically.
*Don't care. Doesn't talk about efficiency.
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs
for that equipment.
*Details regarding solar efficiency, don't care.
(C) Technological changes have increased the efficiency of oil-fired power plants.
* This is exactly what we are looking for: Oil++ efficiency.
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.
* This is an answer from a galaxy far far away.....yea Out of Scope.
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically
viable.
* Don't care. Doesn't talk about efficiency.

Show Spoiler
Answer: C
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Here we have an apparent discrepancy. Converting solar energy directly into electricity has become far more cost-efficient in the last decade. If that is the case, why hasn't the threshold of economic viability for solar power gone down? Let's make sure we understand what they mean by economic viability ("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").

We can infer that new oil-fired power plants are currently more economical than new solar power plants. If the cost per barrel of oil goes up, that would make the oil-fired option less and less economical compared to the solar option. Eventually, if the price per barrel of oil rises high enough, the oil-fired option will become LESS economical than the solar option (i.e. crossing the "threshold of economic viability for solar power").

Imagine that the two options are economically equal (so we're sitting just at the threshold of economic viability). If the cost of converting solar energy into electricity goes DOWN, solar will become the more economical option. However, if the price per barrel of oil also decreases OR if the cost of converting oil to electricity decreases, the two options could become economically equal once again.

Now back to our example... oil plants are currently more economical than solar plants. If the price per barrel of oil goes above $35 per barrel (the threshold of economic viability), solar will become the more economical option. The cost of converting solar energy into electricity has gone DOWN, so we would expect the threshold of economic viability to DECREASE from $35 per barrel. However, the threshold has not changed. We need an answer choice that helps explain why that might be the case:

Quote:
(A) The cost of oil has fallen dramatically.
The actual cost of the oil doesn't change the threshold. Rather, the price of oil simply determines whether we are above, below, or at the threshold. For example, if the threshold is $35 per barrel and the cost of oil falls from $30 per barrel to $5 per barrel, that would take us further away from the threshold but would not CHANGE the threshold itself. Eliminate choice (A).

Quote:
(B) The reduction in the cost of solar-power equipment has occurred despite increased raw material costs for that equipment.
We are only concerned with the cost of solar-power equipment, not the individual components of that cost. Even though the cost of the raw materials has increased, the overall cost of solar-power equipment has decreased. Thus, we would expect the threshold of economic viability to also decrease. Choice (B) does not explain the apparent discrepancy and can be eliminated.

Quote:
(C) Technological changes have increased the efficiency of oil-fired power plants.
If the cost of converting solar energy into electricity goes DOWN, we would expect the threshold of economic viability to decrease. However, if the cost of converting oil into electricity goes down, we would expect the threshold to INCREASE. Thus, if the cost of converting solar AND the cost of converting oil BOTH decrease, the expected changes to the threshold could cancel each other out (one makes the threshold go up, the other makes the threshold go down, so the threshold could remain the same). Choice (C) describes such a situation, so hang on to it.

Quote:
(D) Most electricity is generated by coal-fired or nuclear, rather than oil-fired, power plants.
This passage is only concerned with comparing oil-fired and solar power plants. Other types of power plants are not relevant to the author's argument. Eliminate (D).

Quote:
(E) When the price of oil increases, reserves of oil not previously worth exploiting become economically viable.
As with choice (A), we only care about the threshold of economic viability. The source and the actual price per barrel of the oil do not affect the threshold. Eliminate (E).

Choice (C) is the best option.
Show more


Hi

I am still not clear as to why option A is not correct. Pls clarify my line of reasoning.
If the threshold value has not decreased then might be the cost of oil decreased or the cost of conversion of oil to electricity decreased.
and option A says the first case that cost of oil decrease and that reduces the overall cost of producing electricity from oil.

Pls point out where I am deviating?

Regards
Shoumodip
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Technological improvements and reduced equipment costs have made conve 08 Nov 2017, 13:59
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Quote:
Hi

I am still not clear as to why option A is not correct. Pls clarify my line of reasoning.
If the threshold value has not decreased then might be the cost of oil decreased or the cost of conversion of oil to electricity decreased.
and option A says the first case that cost of oil decrease and that reduces the overall cost of producing electricity from oil.

Pls point out where I am deviating?

Regards
Shoumodip
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Quote:
(A) The cost of oil has fallen dramatically.
Show more
The threshold value is NOT affected by the price per barrel.

For example, say that my "threshold" movie ticket price is $10. In other words, if tickets are under $10, I'm willing to pay. If the movie theater cuts costs and ticket prices drop, that doesn't impact my "threshold" movie ticket price.

In this example, we can infer that the cost per barrel is currently LOWER than the threshold value of $35. So let's say it's currently $30 per barrel. If the price per barrel drops from $30 to $10, that does not change the threshold. The threshold only changes if the cost of converting oil to electricity changes or if the cost of converting solar energy to electricity changes.

I hope that helps!
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Technological improvements and reduced equipment costs have made conve Updated on: 18 Nov 2017, 22:42
Originally posted by sahilvijay on 18 Nov 2017, 15:53.
Last edited by sahilvijay on 18 Nov 2017, 22:42, edited 2 times in total.
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Quote:
Hi

I am still not clear as to why option A is not correct. Pls clarify my line of reasoning.
If the threshold value has not decreased then might be the cost of oil decreased or the cost of conversion of oil to electricity decreased.
and option A says the first case that cost of oil decrease and that reduces the overall cost of producing electricity from oil.

Pls point out where I am deviating?

Regards
Shoumodip
Quote:
(A) The cost of oil has fallen dramatically.
The threshold value is NOT affected by the price per barrel.

For example, say that my "threshold" movie ticket price is $10. In other words, if tickets are under $10, I'm willing to pay. If the movie theater cuts costs and ticket prices drop, that doesn't impact my "threshold" movie ticket price.

In this example, we can infer that the cost per barrel is currently LOWER than the threshold value of $35. So let's say it's currently $30 per barrel. If the price per barrel drops from $30 to $10, that does not change the threshold. The threshold only changes if the cost of converting oil to electricity changes or if the cost of converting solar energy to electricity changes.

I hope that helps!
Show more


Hello,

I just have one doubt after reading your comment, your Threshold =10 USD for ticket, if ticket value 12 USD you will not purchase, and if 8 USD you will.
And then you said ticket value will not change your threshold => and then you said same applicable for Oil example of $35.

This is what i think.
Oil price down => The amount of energy produced in let say when oil price was 50 is x , now the price has fallen dramatically=> say 10 => amount of energy will be more with same amount of oil 50 as you can purchase 5times more oil so your output increased.

Now you say oil price does not affect Threshold = which is Fine as per you, But how technological improvement will affect -> they will also increase efficiency or in other words MORE OUTPUT from oil fired plants , same was in the case when oil prices dropped dramatically..


GMATNinjaTwo Kindly explain and clear my doubt.
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sahilvijay
Hello,

I just have one doubt after reading your comment, your Threshold =10 USD for ticket, if ticket value 12 USD you will not purchase, and if 8 USD you will.
And then you said ticket value will not change your threshold => and then you said same applicable for Oil example of $35.

This is what i think.
Oil price down => The amount of energy produced in let say when oil price was 50 is x , now the price has fallen dramatically=> say 10 => amount of energy will be more with same amount of oil 50 as you can purchase 5times more oil so your output increased.

Now you say oil price does not affect Threshold = which is Fine as per you, But how technological improvement will affect -> they will also increase efficiency or in other words MORE OUTPUT from oil fired plants , same was in the case when oil prices dropped dramatically..


GMATNinjaTwo Kindly explain and clear my doubt.
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If technological changes have increased the efficiency of oil-fired power plants, then we will, as you said, get MORE electricity from each barrel of oil. Let's say the price per barrel AND the threshold value are currently $35 (so we're right on the threshold). You buy a barrel for $35 and get some amount of energy from it. Then we have some technological changes that increase the efficiency of oil-fired power plants. So now we get the same amount of energy using less than $35 worth of oil. But what if the price of oil then goes up to, say, $40 per barrel? Well, that might be fine because now we don't need to use the full barrel to get the same amount of energy that we needed. In other words, we need less oil, so the price per barrel can increase without changing the net price per unit of energy.

Thus, the threshold value INCREASES when efficiency of oil-fired power plants increases, regardless of whether the actual price changes. Now, let's go back to $35 for the current price and for the threshold (again, right at the threshold). Now the price per barrel goes down to, say, $30 per barrel. Great, now we can spend less money to get the same amount of energy. But that doesn't change the THRESHOLD price. That's still sitting at $35 (based on all of the other variables). And if the price then goes up to $36 per barrel, we'll cross that threshold and new solar plants will be more economical.

Remember that the threshold value is a cost per barrel determined by several factors, such as 1) solar equipment costs, 2) cost of converting solar to electricity, and 3) cost of converting oil to electricity. The threshold price is determined by looking at specific values for all of the other variables. If we change one of those values, we change the threshold price. We can COMPARE the threshold value to the current price, but the current price does not AFFECT the threshold value. The current price simply tells us where we stand in relation to the current threshold value.

I hope that helps!
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Technological improvements and reduced equipment costs have made conve 25 Feb 2018, 06:26
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Hi GMATNinjaTwo GMATNinja

How can one infer that: new oil-fired power plants are currently more economical than new solar power plants.

My understanding of argument:

TI and RE have made conversion of solar energy more cost effective in last 10 years.

So ideally what should have happen to other sources which generate electricity, for eg say oil fired plants. Well the cost per barrel should decrease since if we now have more efficient solution in front of us (solar power) why would one want to use oil fired plants to generate electricity ?

My interpretation of economic viability: there is no rise in price per barrel for oil used to generate electricity.

Wait a min. How is this possible? What if new oil fired plants are more effective than solar units? In that case with same amount of oil from well, I could get more electricity than new solar units. This is what (C) says.

Furthermore, the question stem says: Why has not solar power become more cost effective than oil fired plants in spite of two factors in
first sentence assisting conversion of solar power to be cheaper?

Does this reasoning make argument more simpler?
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Technological improvements and reduced equipment costs have made conve 01 Mar 2018, 14:34
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adkikani
Hi GMATNinjaTwo GMATNinja

How can one infer that: new oil-fired power plants are currently more economical than new solar power plants.

My understanding of argument:

TI and RE have made conversion of solar energy more cost effective in last 10 years.

So ideally what should have happen to other sources which generate electricity, for eg say oil fired plants. Well the cost per barrel should decrease since if we now have more efficient solution in front of us (solar power) why would one want to use oil fired plants to generate electricity ?

My interpretation of economic viability: there is no rise in price per barrel for oil used to generate electricity.

Wait a min. How is this possible? What if new oil fired plants are more effective than solar units? In that case with same amount of oil from well, I could get more electricity than new solar units. This is what (C) says.

Furthermore, the question stem says: Why has not solar power become more cost effective than oil fired plants in spite of two factors in
first sentence assisting conversion of solar power to be cheaper?

Does this reasoning make argument more simpler?
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Hi adkikani! I'm not sure whether I'm following your question, but I'll give it a shot...

First of all, we can infer that new oil-fired power plants are currently more economical than new solar power plants. Why?

Because 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 (the threshold) is unchanged. From this statement, we know that the price per barrel of oil would have to rise in order for solar power plants to be the more economical option. This implies that the price of oil is currently BELOW that threshold. If oil prices rise and cross that threshold, THEN solar power will be the more economical option.

Also, just because solar energy has become more efficient over the past decade does NOT mean that it is more economical than oil. Perhaps the technology is now better and the conversion of solar energy is much more efficient, but oil might STILL be the cheaper option. As described above, oil is still the better option. Until the threshold is crossed, the improvements to solar energy won't make a difference.

I hope that helps!
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Ron's explanation:

in this case, the problem is saying that solar power has gotten more efficient, but also that there has been no change in the target price of oil to achieve price equity with solar power. the only way this can be true is if something else related to oil-driven power, aside from the actual price of oil, has become cheaper in line with the improvements in solar power.
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Technological improvements and reduced equipment costs have made conve 14 Oct 2018, 10:48
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For some reason, the explanations regarding why A is wrong didn't make sense to me. So here you have a very easy way to understand it:

You have two different ratios A and B.

A -> priceoil:oil:electricity
B -> pricesolar:solar:electricity

Now, the key is to understand that when we say "threshold is 35" that means we are saying than when we plug 35 on "priceoil", then A and B are the same. That's it! So now, if you tell me that solar:electricity ratio has improved, but that when I plug 35 on priceoil then A still equals B, the only way that can happen is if oil:electricity has improved. And note how "current price of oil" is not a factor here. Yes, priceoil is on the ratios, but we are forced to put 35 there, and it has nothing to do with current price of oil. Makes sense?

Done. I really hope this clarifies this once and for all.
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