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Understanding the argument - ­
Novelists cannot become great as long as they remain in academia. - Conclusion. 
Powers of observation and analysis, which schools successfully hone, are useful to the novelist, but an intuitive grasp of the emotions of everyday life can be obtained only by the kind of immersion in everyday life that is precluded by being an academic. - Supporting premise. Basically, it says that while academia provides the power of observation and analysis, it doesn't provide an intuitive grasp. 

Which one of the following is an assumption on which the argument depends?

We need to find a missing premise or a minimum condition. We need to connect that "Novelists cannot become great as long as they remain in academia" with the premise that "while academia provides the power of observation and analysis, it doesn't provide an intuitive grasp." The gap is that an "intuitive grasp is necessary for novelists to become great."

(A) Novelists require some impartiality to get an intuitive grasp of the emotions of everyday life - Distortion. 

(B) No great novelist lacks powers of observation and analysis - But that's not something that we need. We need an intuitive grasp. Out of scope. 

(C) Participation in life, interspersed with impartial observation of life, makes novelists great - Which makes both the necessary conditions; thus, they can still be great while in academia. At best, it is a weakener. 

(D) Novelists cannot be great without an intuitive grasp of the emotions of everyday life - Yes. It bridges the gap. 

(E) Knowledge of the emotions of everyday life cannot be acquired by merely observing and analyzing life - Yes, the argument, in a way, already said this. See the ONLY way to get an intuitive grasp is by the kind of immersion in everyday life. At best, it's a strengthener. If we negate it, "Knowledge of the emotions of everyday life can be acquired by merely observing and analyzing life," which basically challenges the premise which says, "The ONLY way to get an intuitive grasp is by the kind of immersion in everyday life." Not only that, even if we knew that there is another way to get an intuitive grasp, we still need to tie it as a minimum condition to become a great novelist. 
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