Explanation

- Denoma, an electronics manufacturer, had a sizeable decline in sales revenue
- Electronics retailers report that although their overall sales were lower, their sales revenue from Denoma models actually grew because of new good models of Denoma.

How do we explain this paradox?
The revenue for Denoma decreased but for retailers it increased from Denoma products.

(A) Because of the need to educate the public about its new models’ capabilities, Denoma’s advertising spending was higher than normal over the period.

We are only talking about revenue, not profit so cost is irrelevant.

(B) For the period at issue, Denoma’s major competitors reported declines in revenue that were, in percentage terms, greater than Denoma’s.

We know that Denoma's competitors most likely reported declines (because retailers reported declines on other manufacturer products). Doesn't help tell us why Denoma reported declines.

(C) A significant proportion of Denoma’s revenue comes from making components for other consumer-electronics manufacturers.

So Denoma's revenue depends on two things (at least) - its own products and making components for others. Its own product sold well, but others' products did not and hence that revenue would have decreased for Denoma. So overall, it saw a decrease in revenue though retailers sold Denoma products well.
Explains the paradox.

(D) Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.

Irrelevant. Denoma's electronics sales was not weak. We want to explain why the retailers saw increase in revenue from Denoma electronics products but Denoma saw an overall decrease in revenue.

(E) During the period, consumer-electronics retailers sold remaining units of Denoma’s superseded models at prices that were deeply discounted from those models’ original prices.

Retailers, though they sold some units are deep discounts, still saw an increase in revenue from Denoma. Why did Denoma not see an increase in revenue too? This option does not explain it.

Answer (C)