By default, when device groups at different levels in the Device Group Hierarchy have an object with the same name but different values (because of overrides, as an example), policy rules in a descendant device group use the object values in that descendant instead of using object values inherited from ancestor device groups. Optionally, you can reverse this order of precedence to push values from the highest ancestor containing the object to all descendant device groups. After you enable this option, the next time you push configuration changes to device groups, the values of inherited objects replace the values of any overridden objects in the descendant device groups.
Even a person totally ignorant of PA could only come to the conclusion of C or D, just based off the wording of the question. But it's C, descendants are taken to be more particular, and are by default overriding ancestor settings.
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