Final answer:
The error in the code is that the 'string1' array does not have enough space for the concatenated string, making option C the correct answer.
Step-by-step explanation:
The error in the code provided is that string1 array does not have enough space to store the concatenated string, which includes both "Billy" and " Bob Jones". The strcat function is attempting to concatenate string2 to the end of string1, but string1 is initialized with space only for its own characters plus the null terminator. Thus, the correct answer to the student's question is C: The string1 array does not have enough space to store the concatenated string. This can lead to buffer overflow and unexpected behavior, potentially compromising program stability or security.