Answer:
The correct answer is A. The group could have argued that the city government was endorsing a religion when allowing to display the creche.
Step-by-step explanation:
The Establishment Clause prohibits the government from passing laws that establish an official religion or show preference for one religion over another. The Court, however, declared constitutional some government activities related to religion, such as providing bus transportation for students of parochial schools and allowing the application of the "Sunday rest laws".
Seeing that the government allowed the display of the creche, the group could have interpreted that it was a form of adoption of a religion by it.