Just checked my AFE Air Law (Studying it for my re-take after a 17 year gap from flying) and I think I mis-understood the semantics of the question.
As the temperature decreases, your actual height will decrease, so the Altimeter will over-read as in A Above.
'High to Low, Down you Go'
My reasoning of colder air being denser so the same pressure level is lower in cold air than in warm air was correct.