It's simple fluid dynamics!!! In order for a fluid, any fluid, to exert a pressure must have something to push against. No container = no pressure due to the fluid, only the environment which is pushing on the fluid itself.
Now in the drawing we can argue about whether point C is inside the container or outside. My argument is based on point C being at the air/water boundary the moment the plug is removed and the water EXITS the container. Implying that C is external to the container and hence, no container walls means no gauge pressure to add in to the total pressure.
If your point of reference is that C is inside the container, then I agree, there is a hydrostatic pressure that must be added, but it won't be the same as point B. You have to account for the kinetic energy of the now moving fluid. But given the scope and depth of complexity of the MCAT, I would say on the test that the pressure at B = C in this particular case, given a static fluid. Not enough information is given to calculate the exact pressure at point C if it's moving.
Your statement that fluid at point B is static is incorrect. The fluid at point B is moving, just as the fluid level at point A is getting lower and lower as time goes on. No new water is being added to the system, and even if it were, the fluid would still be moving at all identified points.
On the most basic level, we are on the same page. We both understand that the fluid outside the container is at 1 atm. My posts explain why that is the case. Your posts assume that to be already known by the originator, which it obviously was not.
I think this clears it up. Let me know if you're still confused.