Step 1: Recall the definition of differentiability.
A function is differentiable at a point if its derivative exists at that point. The absolute value function \( f(x) = |x| \) is piecewise-defined:
\[
f(x) = \begin{cases}
x & \text{for } x \geq 0
-x & \text{for } x<0
\end{cases}
\]
Step 2: Differentiate the function for \( x \geq 0 \) and \( x<0 \).
For \( x \geq 0 \), \( f(x) = x \), so the derivative is:
\[
f'(x) = 1
\]
For \( x<0 \), \( f(x) = -x \), so the derivative is:
\[
f'(x) = -1
\]
Step 3: Analyze the behavior at \( x = 0 \).
At \( x = 0 \), we must check the left-hand and right-hand derivatives. The left-hand derivative (approaching 0 from the negative side) is:
\[
\lim_{x \to 0^-} \frac{f(x) - f(0)}{x - 0} = \lim_{x \to 0^-} \frac{-x}{x} = -1
\]
The right-hand derivative (approaching 0 from the positive side) is:
\[
\lim_{x \to 0^+} \frac{f(x) - f(0)}{x - 0} = \lim_{x \to 0^+} \frac{x}{x} = 1
\]
Step 4: Conclusion.
Since the left-hand and right-hand derivatives at \( x = 0 \) are not equal, the function is not differentiable at \( x = 0 \). However, the function is differentiable everywhere else. Therefore, the set of points where \( f(x) = |x| \) is differentiable is \( (-\infty, 0) \cup (0, \infty) \), corresponding to option (A).
Step 5: Verification.
The absolute value function is continuous everywhere, but it is only non-differentiable at \( x = 0 \) because of the discontinuity in the derivative.