The question, from CAT 2, in the reading only involved one one paragraph:

It can be inferred that the author makes which of the following assumptions about biographies?

One also often hears that biographers must like their subjects. That would of course rule out such vastly important subjects as Hitler or Stalin. In practice, the biographer must like the subject not as a person but as a subject. Some are good subjects for the author, some bad. And what makes one subject better than another for any particular biographer varies dramatically. Some of the reasons are purely practical. Does the subject need a biography? Are the materials available? How much time is needed? A biographer's knowledge and ability also determine the choice. Great scientists are great subjects, but can one write about their achievements with insight and authority? Personal idiosyncrasies matter, too. Biographers tend to be attracted to subjects who display particular personality traits, whether they be ambition, cruelty, ingenuity, or any other characteristic that separates a potential subject from the multitudes.

The answer labeled correct is:
D The biographer's credibility with readers is a factor in the critical success of a biography.

The reasoning for this choice is:
In the second paragraph, the author discusses the elements of a good biography, stating that “a biographer’s knowledge and ability also determine the choice” of subject. If the author did not assume that the biographer's credibility with readers is a factor in the critical success of a biography, then this part of the second paragraph would be meaningless.

I don't understand why this is so? The paragraph isn't talking about 'credibility' or the relationship of the biographer with the reader, it's talking about knowledgeability of the biographer in reference to a subject. One can be very knowledgeable, but maybe through something like limited professional exposure, be rather incredible.

My answer choice was C:
Compelling biographies cannot be written about ordinary citizens.

It is said that the choice is wrong, because, "[t]he author concludes in the third paragraph that when choosing a subject, “the biographer’s main question should be, ‘Can an effective book be made out of this person’s life?’” The author most likely believes the opposite of this answer choice: that compelling biographies can be written about ordinary citizens."

The problem is that in the preceding paragraph the author states, while listing practical considerations for writing a biography, "[s]ome of the reasons are purely practical. Does the subject need a biography?" Obviously an ordinary citizen would not need a biography, had they needed a biography they would have to do something extraordinary, at least by this premise. Furthermore the previous statement comes before the statement quoted in the explanation of this answer choice, which would make me think that it serves as a caveat to that choice, rather than as a contradiction. If I'm over thinking this answer choice, I don't think this question has an answer.

I'll appreciate any feedback. Thanks ahead of time!

Let me address your two main points on at a time:

The author's credibility with readers is a factor, as shown by the question: "can one write about their achievements with insight and authority?" Here authority = credibility.

Now, I'm not so sure that this has to do with the "critical success" of a biography, at least from the lines you've quoted. We'd need to see something about the critical reaction in order to prove that. So that leaves this answer choice in doubt, though not because of the word "credibility."

As for C, note that "Does the subject need a biography?" is but one of many factors contributing to the choice of a good subject. (This is emphasized when the author tells us that what makes for a good choice of subject "varies dramatically.")