In the year following an eight-cent increase in the federal tax on a

It's hard to evaluate E because it's not using words correctly (you can't "alleviate the number of smokers"; that's not using "alleviate" correctly). Of course if we have an explanation for a decline in smoking besides price, that contradicts the hypothesis, so if that's what answer E is trying to say, it's a good answer.

But C is also a good answer. The stem points out that the tax alone increased, but then draws a conclusion about the overall price of cigarettes. Those aren't the same thing. If the pre-tax price dropped when the tax increased, those two changes might cancel each other out, or the overall price might even go down despite the tax increase. Answer C tells us that the pre-tax price of cigarettes "gradually decreased throughout the year before ... the tax increase". If the price is gradually decreasing throughout the year, it surely is decreasing by at least one cent several times. The tax increase is only eight cents (it's not 8%, it's eight cents), so answer C makes it at least probable that the overall price of cigarettes was lower in the year after the tax hike than it was, on average, in the year before. And if that's the case, the evidence cited doesn't establish any relationship between after-tax price and smoking, so this contradicts the hypothesis.

E is a better answer than C if it means what I'm guessing it's trying to say (a strong economy leads to a reduction in the number of smokers and there was a strong economy in the year of the tax increase, so we have a different explanation for the smoking decrease). But I don't like these prep company questions that have two right answers, since you never see that on the actual GMAT.