Final answer:
An area of land smaller than a continent and completely surrounded by water is called an island, which makes option C) Island the correct answer to the student's question.
Step-by-step explanation:
An example of an area of land that is smaller than a continent and is completely surrounded by water is an island. The term used to describe this type of land is 'Island,' which corresponds to option C).
Islands can vary tremendously in size, from large ones like Greenland to small ones like those found in an archipelago. An archipelago is a chain or cluster of islands. The British Isles serve as a prominent example, which despite their grouping, are considered to be separate islands. Other examples of islands include Madagascar, Sri Lanka, and Japan, each respectively surrounded by water and distinct from neighbouring continents or peninsulas.
Peninsulas, like the Arabian Peninsula, are areas of land surrounded by water on three sides but connected to a mainland. Isthmuses are narrow strips of land connecting two larger land areas, while an archipelago refers to a group of islands. Therefore, the correct answer to the question is C) Island.