In an America steeped in Romanticism, cemeteries were laid out beyond

Please note the difference between the two different verbs:

lay: to put down and set in position ( I lay the babies in the cot)
lie: to be in horizontal resting position( The babies lie in the cot)

The declination (simple present, simple past, past participle) of the above verbs are as follows:
1. lay---- laid ------ laid
2. lie------ lay ------ lain

Now, in option C the usage is wrong: "cemeteries laid (simple past of the first verb above)..." implies the cemeteries put down someone or something else outside the city (as I put down the babies in the cot). The verb here is to lay... wrong

However if the sentence were "cemeteries lay (simple past of the second verb above)...", the usage would be correct, since then the sentence would imply that the cemeteries did lie outside the city (as the babies lie in the cot). The verb here is to lie.. correct

Nonetheless the correct option A uses the verb lay correctly my constructing the sentence in passive voice: " cemeteries were laid out (past participle of the second verb)..." - the usage is correct since the sentence implies that the cemeteries were laid out by someone (could be the city municipality) out side the city ( as the babies are laid by me in the cot). The verb here is again to lay... correct.