Concept:
- The four statements form two opposing pairs, so only one from each pair can be true and the options can be narrowed quickly.
- Deciding the price pair first settles the whole question.
Step 1: Notice the structure of the statements.
Statements I and II are opposites about profit, and statements III and IV are opposites about price. Any correct option must carry exactly one from each pair. All four options do, so the pairs must be judged on merit.
Step 2: Settle the price pair using competition.
Foreign cotton entering the market gives buyers an extra source. To keep their customers, domestic sellers must match the imported price.
Price therefore falls, so statement III holds and statement IV fails. Options (A) and (D) are eliminated.
Step 3: Settle the profit pair using cost.
Options (B) and (C) both accept the fall in price and differ only on profit. Profit is the gap between the selling price and the cost of growing the crop. The price has fallen while the cost of seeds, fertiliser, labour and water has not.
The gap narrows, so cultivation becomes less profitable. Statement I holds and statement II fails, which removes option (C).
Step 4: Connect this to what the chapter says.
This is exactly the concern raised about globalisation, that cheaper imports can hurt small domestic producers who cannot match the price. Producers of toys, oilseeds and similar goods in India faced the same pressure.
Final Answer: (B) Only I and III are correct.