Premise: Company X, released a martial arts game featuring the character Sam Li, of the popular Fist of Awe series of martial arts movies.

Premise: Company X, released a new game this season with better graphics & other better features but the character of the new game is different.

Premise: marketing surveys showed that teenagers were uninterested in this new game, and the game sold very poorly.

Paradox: The new game is better feature wise than the older version yet it sold poorly.

The question asks us to find a assumption which company X made but did not worked out to be true. Thus find out an assumption made by company X, negating which will explain the new game's poor sale.

A) Teenagers make purchasing decisions based on the technological merits of video games, not the name recognition of the games’ main characters.
This must be the correct option since the new game was better in every aspect except the name of the character. If contrary to the company X's assumption teenagers made their decision on the name of the character then this explains the poor sales of new game.

B) Buyers of video games prefer to purchase games based on popular movies.
This assumption was made by company but negating it wont explain poor sales of the new game. It actually suggest that the new game should have sold better

C) The Fist of Awe series of movies was extremely popular with teenagers who regularly purchase video games.

This might be one of the assumptions made by company X but this was not the assumption on which the new game's character was based on. It is only related to 1st game

D) Technological improvement from one video game to the next does not guarantee a corresponding increase in sales.
This option actually states an assumption opposite to the one made by company X

E) The successful video game may have benefited from advertising associated with the Fist of Awe movies, a benefit the failed video game did not have.
This is not an assumption. This is a mere fact and does not concern success / failure on the new game.