The question asks about what is inferred from bill statement

Bill is suggesting a law to install smoke detectors in every apartment.
Joe disagrees, saying that they are as important for private houses too.

How has Joe interpreted Bill's statement?
It is clear that Joe actually agrees that smoke detector's are important too. He feels they should be installed in both private houses and apartments. Thus his disagreement is not about the smoke detectors, but with Bill's suggestion about apartments. It is clear therefore that he is assuming that Bill is suggesting the law ONLY for apartments, and not for private houses, though this is not clear from Bill's statement.

Thus, Joe interprets Bill's statement to mean that the law should be only for apartments. This clearly points to C, but let's rule out the other choices too.

A. Not really. Who should install/provide these smoke detectors, is out of the scope of the arguments.

B. Joe never refuted the "outside / inside city limits" aspect of Bill's argument. Though Bill did say "in this city", Joe never mentions this in his concerns.

C. Bingo!

D. This is too extreme, Joe doesn't suggest that Bill is claiming that private houses do not have a risk of fire, he is only pointing out that Bill neglected/ignored private houses as an equal concern for fires and thus equally important for them to have smoke detectors. The comparative risks are not evident in Bill's argument.

E. Irrelevant.

About the word "only" in C. This is actually justified here, because that is exactly what Joe's concern is. Bill did not speak against private apartments, or suggest that he believes they do not need smoke detectors, he only neglected to mention them. Joe disagrees with Bill's proposition on the basis that private houses are equally important. Thus it is clear that he interpreted Bill's proposal to be exclusive to apartments.

D is the only other option that comes close, but it is the extreme one here.

By mistake i thought what can be inferred from joe statement.