B. You act as if there is some absolute benchmark for "best able to succeed at [some subject]"...There is not. Sometimes the best engineers can come from people who hadn't initially aspired to be engineers and thus lack whatever credentials they could've built in their high school time. Sometimes character can be the factor in success, sometimes not.
That was, that candidates should be admitted on the basis of academic merit and that the 'right sort' of weaker candidates should not be given special consideration.
It admits enough of the brightest to ensure that it keeps its academic status and then gives special treatment to certain 'desirable' students, who give prestige to the institution in one way or another.
This would, of course, never work if the 'desirables' had to compete academically. They are thus steered into easier courses.
Of course, if the institution does not offer such easy subjects, it cannot play this game.
This debate is often framed as "Harvard vs MIT", where Harvard has been very successful in being ever more prestigious and important with their explicit "the smartest and the richest" strategy, while MIT is great, but not "near monopoly on the halls of power" great. The arbitrariness and thinly veiled racism of the admissions process is vexing, but they are crazy successful.
All that to say, it's not as easy as it seems it should be.
The purpose of a university for undergraduates is not to select people of character, budding entrepreneurs,sportsmen,people with rich parents or anything else-it is to teach an academic subject to those best able to succeed at it.
The way to select them is to let the academic staff who will be teaching them decide. They will do that by means of exams and interview. How hard is that?