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Technological improvements and reduced equipment costs have made conve

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

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New post 23 Oct 2018, 11:56
GMATNinja wrote:
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).



If the cost of oil goes down, the electricity from oil becomes more economical. at same time solar-powered energy is also becoming economical, doesn't it reduce both the costs and maintains the threshold value. As threhsold value is defined (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).
So if both goes down, the threshold should remain same ,as threshold depends on price difference.

Can't find reason to eliminate A over c
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Re: Technological improvements and reduced equipment costs have made conve  [#permalink]

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New post 24 Oct 2018, 03:56
Harshit2802 wrote:
GMATNinja wrote:
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).



If the cost of oil goes down, the electricity from oil becomes more economical. at same time solar-powered energy is also becoming economical, doesn't it reduce both the costs and maintains the threshold value. As threhsold value is defined (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).
So if both goes down, the threshold should remain same ,as threshold depends on price difference.

Can't find reason to eliminate A over c


Check this link: https://gmatclub.com/forum/technologica ... l#p1031748
I have explained in detail why (A) is incorrect and (C) is correct. Do follow the numbers I have assumed to explain. They make the situation clear.
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Re: Technological improvements and reduced equipment costs have made conve &nbs [#permalink] 24 Oct 2018, 03:56

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