I would say E
kinda like "forest also SUPPLY x and (,modifier,) provide Y
E. pharmaceuticals and, as sources of building material and firewood, provide

Whats OA?

87. While they remove carbon dioxide from the air, conserve soil and water, and house thousands of species, forests also supply potentially valuable pharmaceuticals, and, as sources of building material and firewood, that provide employment for millions worldwide.
A. pharmaceuticals, and, as sources of building material and firewood, that provide - comma twice looks awkward, 'that' changes the meaning
B. pharmaceuticals, and sources of building material and firewood, are providers of - comma after pharmaceuticals is ambiguous
C. pharmaceuticals and, as sources of building material and firewood that are provide - that are provide?
D. pharmaceuticals and as sources of building material and firewood, for providing - for providing?, also you need comma after 'and'
E. pharmaceuticals and, as sources of building material and firewood, provide - makes most sense

+1 E

This sentence requires parallelism for the verbs: supply and provide (both have to be working verbs).
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87. While they remove carbon dioxide from the air, conserve soil and water, and house thousands of species, forests also supply potentially valuable pharmaceuticals, and, as sources of building material and firewood, that provide employment for millions worldwide.

A. pharmaceuticals, and, as sources of building material and firewood, that provide
B. pharmaceuticals, and sources of building material and firewood, are providers of
C. pharmaceuticals and, as sources of building material and firewood that are provide
D. pharmaceuticals and as sources of building material and firewood, for providing
E. pharmaceuticals and, as sources of building material and firewood, provide

I think this particular problem is more related with the meaning of the sentence.

Forests supplies pharmaceuticals.
and 'as sources of building material and firewood' forests provide employment for millions worldwide.

The above combination conveys the meaning clearly.

A. pharmaceuticals, and, as sources of building material and firewood, that provide
'and' creates a fragment sentence

B. pharmaceuticals, and sources of building material and firewood, are providers of
meaning distortion

C. pharmaceuticals and, as sources of building material and firewood that are provide
meaning distortion

D. pharmaceuticals and as sources of building material and firewood, for providing
parallelism, 'for providing' meaning distortion

E. pharmaceuticals and, as sources of building material and firewood, provide
correct
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In this sentence 'forests' do two things: A and B. Therefore we need Parallel structure. To elaborate: forests also Verb1 (supply) Phrase1, and Verb2 Phrase 2. Therefore we can home in right away at the end of the underlined part, looking for a verb that matches 'supply' in tense. The only answer that works is (E), which has 'provide.'

The other twist to this sentence is there is an interrupting phrase: '..., as sources of...firewood, ...'. An interruptor should be set off by a comma at the beginning of the phrase and one at the end of the phrase. Only (A) and (E) do so, however (A) is wrong because 'that provide' is not parallel to 'supply.'

Hope that clears things up .
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why there should not be "that" in E option. that provide.

where and when we should use "that " normally ?

Primarily there are 2 usages of that:
1. As a Noun
2. As a connector.

1. As a Noun
Chairs that don’t have cushions are uncomfortable to sit on. Note that, here 'that' refers back to chairs. Because Chairs is a plural noun, you should use verb - do + not for a plural noun = Don't (and not doesn't)

2. As a connector
Eg. I believe that he is innocent.

Let me come back to the quetion:
While they (referring to forests) remove carbon dioxide from the air, conserve soil and water, and house thousands of species,

forests also

1. supply potentially valuable pharmaceuticals and (note here there are only 2 items in the list and hence we use just AND. We do not use comma + and)
2. provide employment for millions worldwide.

Now, 2nd act of providing employment has a modifier which is introduced by way of a phrase between two commas:
, as sources of building material and firewood,

Do not mistake to refer the first comma from modifier with and preceding that comma.

Key in solving SC question is Meaning (and not the grammar)!

Cheers!
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While they remove carbon dioxide from the air, conserve soil and water, and house thousands of species, forests also supply potentially valuable pharmaceuticals, and, as sources of building material and firewood, that provide employment for millions worldwide.
A. pharmaceuticals, and, as sources of building material and firewood, that provide --> NOT PARALLEL
B. pharmaceuticals, and sources of building material and firewood, are providers of --->NOT PARALLEL; INCORRECT MEANING
C. pharmaceuticals and, as sources of building material and firewood that are provide ---> NOT PARALLEL
D. pharmaceuticals and as sources of building material and firewood, for providing -----> NOT PARALLEL
E. pharmaceuticals and, as sources of building material and firewood, provide ----> correct


Parallelism is at play here
Clearly the correct answer is E
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While they remove carbon dioxide from the air, conserve soil and water, and house thousands of species, forests also supply potentially valuable pharmaceuticals, and, as sources of building material and firewood, that provide employment for millions worldwide.

(A) pharmaceuticals, and, as sources of building material and firewood, that provide "that" incorrect modifies "building material and firewood" - it is the forests that provide employment. Eliminate.

(B) pharmaceuticals, and sources of building material and firewood, are providers of Placement of "and" implies that forests provide "sources of building material and firewood". Original meaning is that the forests are the sources themselves. Eliminate.

(C) pharmaceuticals and, as sources of building material and firewood that are providing Same error as in (A). Eliminate.

(D) pharmaceuticals and as sources of building material and firewood, for providing Let's focus on the last part of the sentence: "...forests also supply potentially valuable pharmaceuticals and as sources of building material and firewood, for providing employment for millions worldwide". Clearly an incomplete sentence fragment, not to mention the same meaning error in "source" as in (A) and (C). Eliminate.

(E) pharmaceuticals and, as sources of building material and firewood, provide Correct answer - above errors are eliminated and no new errors are introduced.
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