"B is correct. Point C is twice the depth as point A, so the pressure is twice as great. (P = pgy) This question is really just asking "Do you measure y from the top, or from the bottom?" Of course, you measure y from the top." that's what the answer key says.

They're saying, from what I can tell: P=pgy, at h=7cm, y=3cm lets give p an arbitrary value of 1 since its not given so, P=1(10)(3)=30 now at h=4cm y=6cm so P=1(10)(6)=60 so its doubled. I don't see why we would use bernoulli's (or maybe what i just did is bernoulli's). is the P in your "P + pgh1 = pgh2" supposed to represent atmospheric pressure, because I think atmospheric pressure is 0 since the top is sealed as well. Going off this, I get the feeling that they're actually saying the part under A isn't sealed but rather what they mean by the 2 sealed ends is the part above A and right of D.