In the following question, out of the four alternatives, select the alternative which will improve the bracketed part of the sentence. In case no improvement is needed, select 'no improvement'. The diesel engines replaced the steam engines and the old first class coaches (is replaced) by coupes in a corridor.?

Option 2 : Were replaced

The correct answer is Were replaced. 

Reading the sentence we find that: 

• The verb "replaced" shows the sentence is in the simple past tense.
• So, past tense should be used further as well. Therefore, option 4 is wrong. 
• Also, there are two subjects- the steam engines and the old first-class coaches.
• That means, plural subject, so according to the sub-verb agreement, the plural verb should be used. Thus, option 1 is incorrect.
• The given sentence is in the passive voice form in the simple past tense.
• Thus, the helping verb "were" is used with V3, i.e. replaced. So, option 2 i.e. "were replaced" is the correct answer.

Therefore the correct answer is Were replaced.