Final answer:
The argument between Azaz and the magician in Act 1 of The Phantom Tollbooth centers on the war between Dictionopolis and Digitopolis over the importance of words versus numbers.
Step-by-step explanation:
The best summary of the argument between Azaz and the magician in Act 1 of The Phantom Tollbooth is that Dictionopolis and Digitopolis are at war with each other, making option C the correct answer. This conflict stems from their differing views on which is more important: words or numbers. This disagreement leads to the banishment of the princesses Rhyme and Reason, who previously settled disputes between the two realms, leaving both kings without the guidance of balanced wisdom.