We need to represent the relationship between the three categories: Lions, Elephants, and Animals.
\[\begin{array}{rl} \bullet & \text{Animals is a universal set or a larger category.} \\ \bullet & \text{Lions are a type of animal. So, the set of 'Lions' must be entirely contained within the set of 'Animals'.} \\ \bullet & \text{Elephants are also a type of animal. So, the set of 'Elephants' must also be entirely contained within the set of 'Animals'.} \\ \bullet & \text{A lion cannot be an elephant, and an elephant cannot be a lion. So, the set of 'Lions' and the set of 'Elephants' must be separate (disjoint).} \\ \end{array}\]
The correct representation is a large circle (Animals) containing two smaller, separate circles (Lions and Elephants). This corresponds to diagram (C) in the image.
The options are confusingly mapped. Option (B) corresponds to diagram (C). Therefore, (B) is the correct answer choice.