This tells us that the worldwide clothing market grew by 5 percent while Fabrico's sales grew by 17 percent. If anything, this makes the discrepancy harder to resolve. Fabrico outpaced the industry, which seems to suggest strong demand for its products, not reduced demand.

This is about Fabrico's labor costs, not about demand for its products. Whether employees dropped their demands for higher wages and benefits doesn't tell us anything about how many customers wanted to buy Fabrico's clothing. We need something that explains how dollar sales can go up while demand goes down.

This provides a potential explanation. If Fabrico's prices increased by an average of 42 percent, but total dollar sales only increased by 17 percent, then Fabrico must have sold fewer units of clothing in 1987 than in 1986. (C) shows that the revenue increase was driven by higher prices, not an increase in demand for Fabrico's products. In fact, there was a decline in demand (measured by items sold), despite the increased revenue. With fewer units being sold, it makes sense that Fabrico wouldn't need as much factory capacity.

This makes the discrepancy worse, not better. If Fabrico introduced popular new styles that sold very well, that's even more reason to think demand was strong.

This tells us Fabrico spent less on capital improvements in 1987 than in 1986. But spending less on improvements doesn't explain how dollar sales can rise while demand falls. You might think that because Fabrico added new capacity in 1986, it had excess capacity heading into 1987, and that's why it closed a factory. But even so, (E) doesn't address the core question of how Fabrico's demand could actually go down the increase in sales revenue.