I guess, we'll start with what type of words are "of" and "that".
OF - is a preposition. A preposition links temporal, logical, spatial relationship of the subject to another phrase in a sentence - usually the entire meaning of the phrase is to modify the subject.
THAT - in this sentence, "that" is used to introduce a modifying phrase. moreover, its restrictive, essential, or defining.
Considering the above, is it B (my close second is D)?
My reasoning...breaking this sentence into some 2 pieces...
a) if your subject is "generalization", and you are describing a logical relationship to the other part of the sentence, it makes sense to use "of" vs "that".
b) if your next subject is "difference", you are describing something and in that sense, you are defining and being restrictive - in which case you need to use "that" vs "of".
Not sure if I got it right, but let me know what is the OA.