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 (this $50 is the infra cost for solar power).

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 here).

Oil based electricity is cheaper. But if the cost of oil rises by $10 (from $25 to $35), solar power will become viable. Now, at both places, cost of one unit of electricity will be $50.
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.