sudeep
Usage of 'As' seems correct, but it should imply that gradually machines were replacing the humans.
I think best choice would have been if given an option
As machines started replacing the human laborFor me C doesn't represent the continuous process, which should correctly correspond to the second part of the sentence "continue to become shorter".
.. It would keep getting shorter as machines were replacing the human labors.
I think continuous is required in here. (left with the options A and E)
A is awkward.
I will go with E.
In E
"Human labor being replaced by machines" is modifying "there" (location could be city, town , etc). Any opinions on it? Is it the correct modification. I am not sure but make some sense to me.
Please put forth your opinions.
A note on the above, this is a meaning issue (I think).
It makes total sense to say "During the Industrial Revolution, as machines replaced human labor, it was widely anticipated that the workweek would continue to become shorter."
So it's something that was widely anticipated to continue happening in the past. I think it's easy to assume that the action must be going on now.
As far as the problem itself:
B,D are out become there is not "that" to connect the the 2 clauses
A,E are out because of verb tense mismatch