When should a vessel display its lights and shapes?

Answer: C — At all times when the vessel is underway, in restricted visibility, or at anchor

A vessel is required to display its lights and shapes at all times when it is underway, in restricted visibility, or anchored to ensure safety and promote effective communication between vessels. This adherence to the regulations helps prevent collisions and allows other mariners to understand the status and type of vessel they are encountering. Displaying the proper lights during nighttime or low visibility informs other boats about the vessel's position, heading, and activity. Similarly, shapes signify specific statuses; for example, a vessel at anchor would show a specific shape indicating that it is not underway. The other options incorrectly limit the situations in which lights and shapes are necessary. B and D suggest restricted scenarios that do not encompass all the required cases, while A only considers nighttime and restricted visibility, ignoring the important requirement for vessels at anchor. Thus, choice C accurately encapsulates the full range of conditions that necessitate the display of lights and shapes, ensuring safety and compliance with the rules.