Official Explanation
The meaning of the original sentence, as determined by (A), is important here. There is a fine soft hair that insulates the body. Technically, we could have a “which insulates the body” referring back to the lanugo, since the lanugo is the fine, soft hair in question here.
Either is fine, so a good way to attack this question is by eliminating wrong answers. The best way to do so is by focusing on those that change the original meaning of the sentence. For instance, (C) shifts the focus from the lanugo remaining until birth to the wrinkles remaining until birth. (E) does the same thing by stating “….skin, which remain…”
(B) also changes the meaning of the original sentence because “these” is a plural pronoun pointing either to wrinkles of deposits.
Finally, the tricky one: answer (D). Notice, the “which remain”. Remain is consistent in number with a plural noun. However, it is the “hair that remains”.
Answer: (A)
FAQ: Wouldn't "a fine, soft hair" mean there is one single hair?A: Grammatically, both "fine, soft hair" and "a fine, soft hair" are correct. In either case, the word 'hair' would be used as a collective noun, which means it needs a singular verb. That's how Chris ruled out several of the answer choices.
When the sentence says "a fine, soft hair", it's really saying "a type of fine soft hair". So it's just leaving those words out (which is still fine, grammatically). If we wanted to put those words back in, then the sentence would read like this:
At approximately 22 weeks, a fetus becomes fully covered by lanugo, or a [type of] fine, soft hair that insulates the body until fat deposits accumulate in the wrinkles of the skin, often remaining until birth.
Whether or not to include the article 'a' is just a matter of personal preference. It would still be correctl to leave the article out and say:
At approximately 22 weeks, a fetus becomes fully covered by lanugo, or fine, soft hair that insulates the body until fat deposits accumulate in the wrinkles of the skin, often remaining until birth.
So either of these would be perfectly suitable in English.