Although it is an imperfect model for describing a complex market

Hi purvikhandelwal1, I'll be happy to help.

I would like to preface my response by mentioning that, straight off the bat, this doesn't appear to be a very "GMAT-like" question -- it's more similar to a GRE-themed "select in-passage" question type (and even then the question does seem to be a bit odd, to say the least).

With that out of the way, the only possible answer to this question can be Option (C), since only the third sentence exemplifies (or illustrates) a concept, i.e., that of supply. Thus, sentence 3 -- "for example, a manufacturer might be willing to sell 7,000 sprockets if each one sells for $0.45, but would be willing to sell substantially more sprockets, perhaps 12,000, for a higher price of $0.82" -- is an example to better understand the theoretical/abstract economic concept of "supply".

I also don't particularly like the usage of the word "abstract" in the question: the concept of "supply" is a concept, sure, but whether it is an abstract concept is anybody's guess.

I would recommend sticking to official/LSAT passages for RC practice (along with daily reading, of course ). The passages there always conform to the GMAT-styled passages -- LSAT passages are slightly harder, but that should be considered good practice -- in terms of the flavour, questions, and passage structuring.

Hope it helps.