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The reference for it or its is out of place, wherever it appears. Only B avoids the trap and is the right choice for me.
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B - because of two reasons :

1) The ambiguity of "it is" is not there(it can refer to wood also).

2) More subtly, "market for all other" is required instead of "market for all" because paper's market can't be more than that of itself, if you say "market for all", you include paper also in that.
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Option A - Incorrect

"it" illogically refers to "market for paper". Incorrect.
"all" includes "market for paper". We need to say "all other".

Option B - Incorrect

"the market for paper is growing faster than the market for all other major wood products [is]" -- Note that the verb "is" is implied.

Option C - Incorrect

"it" refers to "paper production". Illogical.

Option D - Incorrect

"it" refers to "paper production". Illogical. "all" includes "market for paper". We need to say "all other".

Option E - Incorrect

"its" illogically refers to "paper production".
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Paper production accounts for approximately 40 percent of the world's industrial use of wood, and the market for paper is growing faster than it is for all major wood products.
(A) the market for paper is growing faster than it is for all - OTHER is required at the end to make correct comparison between two categories. Hence Incorrect.
(B) the market for paper is growing faster than the market for all other - CORRECT
(C) the market for it is growing faster than it is for all other - Antecedent of IT is ambiguous since it is referring to both PAPER and MARKET. Hence Incorrect.
(D) its market is growing faster than the market for all - OTHER is required at the end to make correct comparison between two categories. Hence Incorrect.
(E) its market is growing faster than it is for all other - Antecedent of IT is ambiguous since it is referring to both PAPER and MARKET. Hence Incorrect.
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