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While all academic institutions in the country face financial difficulties, polytechnics and the Institute of Scientific Research is in serious danger of closing down.
This answer choice corrects the original Subject Verb Agreement mistake, by replacing the singular verb is with the plural verb are.
Note also that the change from is to was constitutes a meaning change.
Notice also that this answer choice adds a new mistake: it replaces the singular noun Institute with the plural noun Institutes. This creates a change in meaning. Since there is an answer choice that corrects the original mistake without making any more changes, it is superior to this answer choice.