"He told the shopkeeper that he wanted to build cars" is the key phrase here.
There's no dialogue, just a description of part of the conversation. That is mainly the goal of the author in this excerpt: to show this conversation. That's why Amal searches for a book about cars and talks to the shopkeeper.
There's no theme being developed. The author is revealing something about the character. There's no dialogue, therefore it's not an example of a dialogue. And there's nothing about the setting, it is about the characters.
The correct answer is:
C.This is an example of the writer telling through description rather than showing through dialogue