Step 1: When a cut-off point is placed on overlapping distributions of a diseased group (diabetics) and a non-diseased group (normals), four zones are created relative to that cut-off.
Step 2: A cut-off of 120 mg/dL separates those called positive (above cut-off) from those called negative (below cut-off).
Step 3: The part of the diabetic curve that falls on the normal (lower) side of the cut-off represents truly diseased people who are wrongly labelled as negative by the test. These are false negatives.
Step 4: By contrast, the part of the normal curve that crosses to the positive side would be false positives; correctly classified diabetics above cut-off are true positives, and correctly classified normals below cut-off are true negatives.
Step 5: Since the question specifies the area belongs to the diabetic curve but lies toward the normal glycaemic side (below the cut-off), it represents diabetics missed by the test, i.e. false negatives.
Conclusion: The overlapping area is a false negative. The printed answer key (D. False negative) is correct.