The correct answer is C. it directly affects the mood of the piece.
Setting and mood are intricately connected - one can affect the other. Based on the setting, a text can have various kinds of moods. If the novel is situated in a dark, mysterious, Gothic castle, then the mood is probably going to be eerie and full of tension. The setting cannot affect the pace, the dialogue, or the conflict much, but it can have a powerful effect on the mood.
