Looking at the answer options:

'The pilot may conduct the flight with NO restrictions if the flight remains in VMC and alternative means for navigation are used'. --> INCORRECT. The MEL states 'May be inoperative for VFR-by-day only', not for flight in VMC. An IFR flight could be conducted in VMC, but the MEL limits flight to VFR by day only.

'The restriction in the MMEL applies because this is the master document produced by the aeroplane manufacturer'. --> INCORRECT. When flying the line, your source document is the MEL, as written by your operator and found in the OPs manual Part B. It is more restrictive than the MMEL.

'This flight may be conducted as planned if it is daylight and the flight is planned according to VFR only'. --> CORRECT. The MEL states 'May be inoperative for VFR-by-day only'. When flying the line, your source document is the MEL, as written by your operator and found in the OPs manual Part B.

'Restrictions in the MEL are less strict than the MMEL and therefore the MEL must be used in this case'. --> INCORRECT. The MEL will be more restrictive than the MMEL, and certainly can not be less restrictive.

Master minimum equipment list (MMEL). A list established for a particular aircraft type by the organization responsible for the type design with the approval of the State of Design containing items, one or more of which is permitted to be unserviceable at the commencement of a flight. The MMEL may be associated with special operating conditions, limitations or procedures.

Minimum equipment list (MEL). A list which provides for the operation of aircraft, subject to specified conditions, with particular equipment inoperative, prepared by an operator in conformity with, or more restrictive than, the MMEL established for the aircraft type.

• The manufacturer draws up a Master Minimum Equipment List (MMEL). The MEL (Minimum Equipment List) is drawn up by the operator and cannot be less restrictive than the MMEL.