D: observers' own beliefs influenced their ratings of the debaters,
    regardless of the positions taken in the debate

    Incorrect.

Incorrect.
In section, group 1 was assigned to argue that the prison study was ethical, group 2 was assigned to argue that the prison study was unethical and group 3 was given the task of observing the debate to ascertain what the members of groups 1 and 2 true attitudes were.  This did not happen in this activity.  Clearly, the members of the observer group (group 3) believed that those debating (groups 1 & 2) supported the positions they were arguing.  In this section activity, the observer group (group 3) committed the fundamental attribution error, which is overestimating dispositional causes (e.g. person in group 1 believes the Stanford Prison Study was ethical) of a behavior, and underestimating situational causes (e.g. person in group 1 was assigned to argue the Stanford Prison Study was ethical).  This particular aspect of the fundamental attribution error (e.g. an observer believing that a person arguing a particular position, actually supports that position, even when the observer knows that person was assigned to argue that position) is termed the Correspondence Bias.  Since answer D says that observers own beliefs influenced their ratings of the debaters, regardless of the positions taken in the debate, it is incorrect, because members of the observer group were influenced by the arguments of the members of groups 1 & 2.  More precisely, they felt that the members of groups 1 & 2 believed the positions they were arguing.  Often, our own beliefs do influence what we see, but this did not happen in the demonstration.