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  1. Mark was known to play better than James
  2. Steve was known to play better than Mark
  3. James and Steve were good friends
  4. James played better than Steve
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Option 2 : Steve was known to play better than Mark

James tells Mark that he was the best player in his own family. This means Mark was not the best player in his family and so James makes this comment. Thus we can infer that Steve was known to play better than Mark.
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