Make-believe wouldn’t work without a good grasp on what’s real and what’s pretend, and children can tell the two apart if asked. Thus, children have a sophisticated understanding of what’s real and what’s pretend. This accurately paraphrases the author's conclusion.

This is a premise that supports the author’s argument. If children can answer correctly whether something is real or not, this suggests they have a good understanding of real versus pretend.

This is an implication of the author's discussion of how children react to a father pretending to be a lion. But (C) isn't the conclusion. The author's discussion of a child's reaction to a lion is offered as support for the claim that children have a reasonably sophisticated understanding of what's real and what's pretend.

This supports the conclusion. Since children aren’t terrified in the presence of a pretend lion, they must know it isn’t real. Therefore, they have a good grasp on real versus pretend.

This restates the last sentence, which is a premise that supports the author’s conclusion. The author assumes that we can explain the pleasure that children get from make-believe. Because of this assumption, the author believes the contrapositive of the last sentence is triggered, which would imply that children can distinguish the real from the pretend.