GMATPrep: Solar Energy CR

Answer is C. It's a difficult one to explain, but Let's try to understand the dynamics:
The basic idea is that an oil power plant uses oil, while a solar one does not. Apparently, there's a threshold of viability - if oil costs more than $35, then an oil based plant becomes more expensive to run than a solar power one which doesn't use oil, and people will start building solar plants.
Now, over the last decade, Solar itself has become cheaper. We would expect the threshold to go lower - maybe it's worth it to switch to solar at $20 already, instead of $35 - but No! the threshold remains the same. Why? Why is it still not worth it to move to solar? we know that solar has improved, so apparently something must have also happened on the oil side, making it still more economical to make oil plants even if oil becomes expensive.

C does exactly that - it tells you that there's been some improvement on the oil side, so oil plants are more efficient: meaning that they "make more from less", or need to burn less oil to reach the same productivity. So even if oil prices rise, the fact that oil plants are more efficient in their consumption of this oil compensates, leaving the threshold at $35.

This question is difficult because it has many nice sounding answer choice. The key is to understand the concept of the threshold, and concentrate on what the question is asking - why did the threshold not change. We don't know, and don't care what happened to the actual price of oil itself: whether oil actually costs $5 a barrel (and people are still building oi-plants) or $80 a barrel (and people are no therefore building solar plants) is unimportant. What's important is why the threshold - the point at which it is economical to switch - has remained the same.

@Geva Stern

We don't know, and don't care what happened to the actual price of oil itself: whether oil actually costs $5 a barrel (and people are still building oi-plants) or $80 a barrel (and people are no therefore building solar plants) is unimportant.

Price of oil falling drastically can makes the oil plant efficiency very high in comparision to delta improvement in efficiency ( debatable). I belive price of oil is a significant point. more oil plants does not mean that price of oil will increase.

The difficulty of the problem is bet'n A and C : Since we can not calculate emperical difference in effeciecy Answer A is correct because , according to the initial wording of stimulus, huge diff is required for threshold.

Please correct if I am wrong.

SmarpanGamt wrote:@Geva Stern

We don't know, and don't care what happened to the actual price of oil itself: whether oil actually costs $5 a barrel (and people are still building oi-plants) or $80 a barrel (and people are no therefore building solar plants) is unimportant.

Price of oil falling drastically can makes the oil plant efficiency very high in comparision to delta improvement in efficiency ( debatable). I belive price of oil is a significant point. more oil plants does not mean that price of oil will increase.

The difficulty of the problem is bet'n A and C : Since we can not calculate emperical difference in effeciecy Answer A is correct because , according to the initial wording of stimulus, huge diff is required for threshold.

Please correct if I am wrong.

If the threshold would come down from 35 to $20 - meaning that solar has made some good changes - even at this point, if the price of oil falls below 20, I'll still go with oil. That's the point of the threshold: below $20 I build oil plants, above $20 I build solar plants. that's always true. If the question had asked "Why are people still building oil plants despite the improvement in solar technology?" then A could've been the explanation - the threshold for the move has fallen, but oil prices are still low enough to make building oil plants still cheaper. In this case, I would care about the actual price of oil, but that's not what the question asked. A is a trap answer for people asking the wrong question.
But the question isn't asking "why am I not building solar", but rather "why has the threshold itself not come down from $35?"
if we accept that the solar advances should have lowered the threshold (say to $20), then already I should be moving to solar when oil hits $20 - why are people still willing to accept oil prices of up to $35 and still build oil plants? Why use oil that is "too expensive" under the new situation?
C provides an answer - people are willing to "overpay" for oil because the plants have become more efficient - they require less oil than before, so they can buy "too expensive" oil and still come out ahead.
Does this make sense?
the advances in solar energy did not realy make it cheaper (but the argument says it did)
OR
oil