The answer given as the OA is D. I would argue that this question in fact has no correct answer!
Remember - that this is an assumption question and the correct answer is the one that is absolutely required by the argument.
Let's analyze the argument. Conclusion: "many excellent prospective candidates will opt not to accept fulltime positions, which will lead to a shortage of qualified full-time professors."
policy: "schools are propagating rules which set strict limits on the amount
of material that a full-time professor may publish over a certain time period"
link to conclusion: "faced with the loss of any outside income"
So what would need in an answer is what would be required to be true in order for this policy of limiting the amount of material that professors are allowed to publish to lead professors losing any of their outside income and then those professors not accepting a position at the university?"
A) Universities generally receive a large percentage of the royalties from works published by their full-time professors. This is irrelevant. It is professor's outside income we are concerned with.
B) Most professors do not allow their outside work to infringe on time that should be spent on classroom preparation and teaching. Also irrelevant. No one is saying that the professors do a good job of teaching!
C) Restrictions on outside publishing do not apply to part-time or adjunct professors. This answer has some promise. As noted by burningman, the conclusion speaks of full time professors. As in, the candidates will no accept positions as full time professors and there will be a shortage of full-time professors. This seems the best answer of the five, but is it really required that the limitations not apply to part time and adjunct? This argument speaks of "Some" universities setting limits. What if those limits did apply to part time and adjunct? In other words what if C is taken away? Well those qualified professors just go to another university. I would say that C is a strengthen answer but is definitely not a proper answer for an assumption question.
D) Publishing is the only source of outside income available to full-time professors. Note the change in this answer with the word "ONLY." This changes things. Only is a terrible word to find in an assumption answer. It does not mean that the answer is absolutely ruled out, but the requirements are very high. You literally have to prove that the argument requires that this be the ONLY source of outside income. This is not required as the argument says that the professors will not take the job is they lose ANY outside incomes. So this is certainly not the correct answer whatever the answer key happens to say. This would be a great strengthen answer. If this is the only source of income then losing it would be very bad. But remember that the answer choice needs to be something that is required and this is not required.
E) All professors at prestigious universities currently publish more material than is permitted under the new rules. We have another word that we do not need to see in an answer choice -- "ALL" This is a very difficult word to sustain in an assumption question. When do you require that ALL of something have a characteristic? If I say that my pen has black ink, do I assume that all pens have black ink? If I say that LeBron James is a spoiled child do I assume that all NBA players are spoiled children? The answer is no. You can have a shortage of full time professors without ALL of them publishing too much material for the new rules.
So, as you see there is no correct answer to this question. A proper answer would be something like: "At least a few professors would have a loss of income under the new rules." Because if this were not true then NO professors would lose income and the argument would fail.