Step 1: Type 1 diabetes mellitus is caused by an absolute deficiency of insulin. Insulin normally suppresses fat breakdown, so when it is missing the brake on fat stores is lost.
Step 2: The lack of insulin leads to uncontrolled lipolysis, releasing free fatty acids from adipose tissue and driving increased fatty acid oxidation in the liver.
Step 3: This excess fatty acid oxidation produces large amounts of ketone bodies (acetoacetic acid, 3-hydroxybutyric acid, and acetone), which dissociate at body pH and cause metabolic acidosis (diabetic ketoacidosis).
Step 4: The other choices are wrong because in type 1 diabetes protein catabolism is increased (not decreased), hepatic glucose output is increased (not decreased), and glucose uptake into tissues is decreased (not increased) due to lack of insulin.