That would be Це столиця. This one says "Це місто [є] столиця" = "This city [is] a/the capital", not "This is a/the capital", we just don't say "is", so that's confusing :)
I guess it has to do with Kiev (Kyiv) being the nation's capitol but that is still strange since it says 'capital'. Maybe they thought that having 'the' be the answer it would sound like you're enunciating it which would make it sound like/refer to Kiev THE capitol? I don't know, just a guess
This must be spelled capitol. Capital relates to monetary items and large equipment. A capitol is where a government is centered, established and functions.