The problem with questions such as this is that they encourage you to not read the text as a whole. Often, when we are asked questions about specific parts or words of a text, the answer can be easily found in the text if we read it as a whole, trying to work out how the words or phrases we are asked about fit in. Therefore, with this particular example, it is important to read the entire line from which it is taken, which talks about the effect of the gas on the dying man who has failed to put his gas mask on in time:
And flound'ring like a man in fire or lime...
Thus we can see that the word "flound'ring" is used as part of a simile (indicated by the word "like"), where the man is compared to somebody floundering around as if he were in lime. Thus the correct answer is in lime.