Final answer:
The statement that best describes the third-person point of view where the narrator observes the story with limited insight into characters' thoughts is 3) 'The third-person point of view is an observer with limited omniscience.'
Step-by-step explanation:
The third-person point of view in literature can be defined in a few different ways based on how much the narrator knows about the characters' thoughts and actions.
If a narrator is outside the story and sees it from a broader angle with insight into all characters' thoughts and actions, regardless of their presence, this is known as third-person omniscient.
Conversely, a third-person limited narrator only aligns with one or several characters, revealing only their thoughts and limiting knowledge to what those characters know.
Based on the descriptions provided, if the narrator in the excerpt is an objective character who does not participate in the story and uses third-person pronouns such as he, she, and they, the statement that best describes this point of view is option 3: The third-person point of view is an observer with limited omniscience.
This means the narrator knows more than the characters but does not have complete knowledge of all characters' thoughts and actions.