Final answer:
Option C is correct option. People in Norway, Denmark, and Sweden can understand each other due to similarities in vocabulary, grammar, and shared linguistic history. Icelandic is challenging for them to understand due to its linguistic isolation and unique development away from other Scandinavian languages.
Step-by-step explanation:
The ability for people in Norway, Denmark, and Sweden to understand each other's languages can be attributed to similarities in vocabulary and grammar, as well as shared history and cultural ties. These countries speak languages that are part of the Scandinavian or North Germanic language group, which evolved from the same Old Norse language. This shared linguistic history results in a high degree of mutual intelligibility between their respective languages.
In contrast, Icelandic has undergone less change since the Old Norse period due to linguistic isolation, partly because of Iceland's remote geographic location. Hence, people from Norway, Denmark, and Sweden find Icelandic more challenging to understand. Icelandic's unique development, coupled with a lack of frequent interaction and a divergence from common linguistic trends, has made the language distinct from other Scandinavian languages. The linguistic isolation of Icelandic makes it a less mutually intelligible language for other Scandinavian speakers, making the option c) 'Linguistic isolation of Icelandic' the correct answer to why it is challenging for them to understand Icelandic.