The question is framed in such a way that the given pseudocode is executed where A captures the desired output. Yes, using C as a variable doesn't produce any logical or syntactical errors, but then we should've been asked to mark the options which aren't syntactically correct.
Given the 'specific' question, the 'specific' answer is that using C is not desired, or at least we're led to believe so. Also, the question asks us to pick out the 'mistakes' rather than 'errors'.
Nevertheless what you said, Zorba, is a justification of IIT's answer to that question, and sure we could come up with plenty more justifications apart from yours. Plus I don't care if I'm given marks for the question either. I'm just pointing out that such ambiguity should be avoided in such objective questions, especially since we're gonna face similar exams every month from now on.