- When shall we hold the meeting?
- It ____ be better to put it off until next week.
A. must
B. could
C. can
D. will
To me, would works well because (i) the phrase it would be better is a fixed phrase, (ii) its conditional sense, and (iii) the function of the structural subject It:
Conditional It would be better
if we put it off ...
Existential-it
It
would be better to put it off until next week.
Putting it off until next week would be better.
Cf. pronominal-it
It will be better when you see a dentist.
Your tooth/Life will be better when you see a dentist.
The key (B. could) is probably a typo and should read B. would.