In the setup, I described the following deduction: P has to be in.
Why? We need five colors. If any one color is out, then all the others are in.
This has a big effect on peach. If olive is out, then peach is in (because all other colors are in). And if olive is in, then peach is in (rule 2).
So C is CORRECT. Peach has to be used.
All of the other answers don’t have to be true. This scenario disproves A, B and E:
This scenario disproves D:
Remember, if something isn’t forbidden, it’s allowed. You should not agonize over whether a hypothetical scenario “works”. If it breaks no rules, it’s allowed.
So it should not take you much time to draw a scenario that doesn’t violate rules, in order to disprove a specific answer. Because anything works if it doesn’t break a rule.
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