The correct answer is "There is an error in sentence number 1".
Step-by-step explanation:
Paragraph C of the text presented is composed of three different sentences that explain the way Gus and Frieda had an idea and developed it. In this paragraph the second and third sentence are both correct but in the case of sentence one there is a spelling mistake or a mistake in the way a word should be written, this occurs as the word "studyed" in sentence 1 "Gus and Frieda studyed the situation then got an idea" is incorrect, because the correct verb form for the verb "study" in past is "studied", which means there is an error in this sentence and the statement that is true about paragraph C is "there is an error in sentence number 1".