SSC MTS 2 Aug 2019 Shift 2 Paper

The error lies in the 2nd part of the sentence.
The subject is in plural form and takes present participle form of the verb 'have'.
'is done' must be replaced with have done. Moreover, 'is done' will make the sentence passive which is incorrect.
The correct sentence will be: All the students have done better this year.
Hence, Option 2 is the correct answer.