I agree with C as well. I used POE as also. None of the answers are that strong so I just decided to pick the strongest or the one that is most likely. I've seen some questions like this in Princeton Review problems but not on GMAT Prep tests. usually there is at least two that stand out when dealing with a question type that you have to pick the strongest answer of 5 fairly weak choices. Anyway,

A. states that prices has climbed "steadily" whereas the stimulus states that price has risen "dramatically" - reject
B. doesnt make economic sense if there are harsh econ conditions and high taxes causing a drop in new cars sold, a tax reduction for mid-low income fams wouldnt cause current prices of new cars to rise dramatically. - reject
C. strongest one. doesnt really explain the "dramatic" avg price increases, but stable prices for expensive cars coupled with an increase in prices for mid-low priced cars could cause the avg prices to increase especially if the # of mid-low priced cars sold largely outweighs the # of expensive cars (if you take avg price based on total # of cars/total car sales), but this is stretching it. Kept it just because it held the strongest logic of all 5 - Correct
D. Doesn't make any sense. -reject
E. Stim has to do with cars, not trucks or vans. If it said vehicles in general, maybe this could be considered.

So I chose C because its the only I one I could rationalize to explain the paradox, even though the explanation is still somewhat insufficient.

I don't see any of the options having a proper justification here.

C says that the price is unaffected for expensive cars and argument says selling of new cars (expensive or not ?? Don't know ) has decreased due to economic conditions. So, unless and until price of new cars(avg price cars) does not increase substantially, overall avg will not rise.

Pricing info is not provided in the argument. All it says is that taxes increased but we have no way to figure out whether this increase in taxes is offset by low selling of new cars.

But, yes, POE gives C.

Answer is C, without any doubt.

Suppose

Last year : 1000 cars were sold [ 700 low price , 300 high price ]
This year : 600 cars are sole [ 300 low price, 300 high price ] --> market for high price cars is unaffected.

So obviously the avg price for the new cars will increase for this year.