Why is this not the correct answer ?

The operator in the middle is the union (or). You seem to have read it like an intersection.

The points that are outside of C, or inside the difference of B and A, are illustrated in the third diagram.

It might be easier to find the complement, the white region.
Use De Morgan's laws
C and (A or not B).
So this is C without (the area in B outside of A). This is somewhat easier to spot correctly.

That's all if I'm reading the 3 pixels correctly. Do the images you upload look legible on your side?

I can't see the full question because it is so blurry, but I can see that it starts with the complement of C union with something else.

The complement of C would be everything outside of C which looks likes the third picture. The extra bit is what is being added (unioned).