does the word "or" use Inclusive or Exclusive logic on my test? and how do I identify the logic that is being used?

It is usually expected in a multiple choice question that each answer will be a distinct possibility or set of possibilities, and generally an answer consisting of "this OR that" where one is correct and the other isn't is considered poor question form.

If I said to someone in conversation:

The cut tool in Microsoft Word can cut or select certain information.

They would, quite understandably, assume that the cut tool is capable of doing both of those things. Applying the same statement structure in the context of a test question doesn't change its implied meaning. When I say this, what I am actually saying is

The cut tool in Microsoft Word can either be used to cut certain information or select certain information. It is capable of both of these things and you can choose which one to use it for.

When you are listing capabilities of a function, using the word "or" is taken to mean that the user can choose which capability it has, but that the function can perform all of the capabilities listed. If this weren't the case, why would that capability even be included in the list in the first place? The question was poorly-written and I think you should escalate to student services.

I agree that it's a poorly worded question and you have a point that the correct answer is open to interpretation. However, in my education experience, the correct thing to do in when answering such a question is to ask for clarification before answering, mainly because you could make up your interpretation for the answer after learning that your choice is wrong. This is admittedly difficult to do in some classrooms which have a strict no talking policy during exams.

There is a subtler meaning at play than the distinction you draw. Answer A could be saying that "cut or select" are different words for the same operation. The most common computer terms for the operation is usually Select text → Cut operation → move cursor to desired insertion point → Paste operation (which makes this technically incorrect, in my opinion). However, another way of saying it is that after you have used the Cut operation, you have selected which text/content you are going to paste.

Because of this distinction and the interpretation your teacher regards as the correct one, answer A is definitely the most correct answer. Consider that "C None of the above" negates answers A and B and turn it into a statement in the form of the original question; you are then saying:

In Microsoft Word, the scissors function would not be used to cut certain information, select certain information, or bolding a word.

John Clifford's answer is clear, well-written and correct. I expand:

First, let's establish consensus where it exists: In Microsoft Word, the scissors function would not be used to select certain information. However, it would be better to express the core idea more clearly, like this: "In Microsoft Word, the scissors tool is not to be used to select text." On this, surely, we have consensus.

In order to correctly answer the question, the most important thing to understand is that this is a situation where the rules of English rule, not the rules of boolean logic. Here are two arguments:

Imagine there's a statute that says: "A valid license entitles you to drive a car or small truck." Imagine you get a license, and get pulled over and issued a ticket anyway. You're told that you only have one license and were seen driving both a car and a small truck. That would be messed up! Because even though the word or is used, the only sensible interpretation of the or in the statute is that it means both can be driven.

In English, this sentence is false: "In Microsoft Word, the scissors function can be used to cut or select certain information." It's false because the or in the sentence means both can be done, and that's not the case. It cannot be interpreted in a boolean/CompSci/math logic sense because "select certain information" is not a predicate.

In boolean logic, this sentence is true: "In Microsoft Word, the scissors function can be used to select certain information or in Microsoft Word, the scissors function can be used to cut certain information." It's true because the or in this sentence means it's asserted that at least one or the other predicate is true, and that is the case, because the first predicate is true. But that's not the sentence that was in the test question!

I read answer A as saying that using the scissors icon in Microsoft Word allows me, the user, to either cut certain information or select certain information, and that which of these two things I do depends on some choice I make, whether it be because a menu appears after using the icon, or because it performs one function in one context, and the other function in another context.

But in reality, there exists no circumstance in which the scissors icon can be used to select information. Because I do not have the choice to "cut or select" certain information, but in fact can only cut certain information with the scissors icon, answer A cannot be the correct answer.

This is not the same as the logical "inclusive OR" interpretation:

A is true  if x is true  and y is false  <-- (A is true)
A is true  if x is false and y is true
A is true  if x is true  and y is true
A is false if x is false and y is false

Nor is it the same as the logical "exclusive OR" interpretation:

A is true  if x is true  and y is false  <-- (A is true)
A is true  if x is false and y is true
A is false if x is true  and y is true
A is false if x is false and y is false

Because there are at least 3 possible interpretations of answer A, and because they give differing results on the correctness or incorrectness of answer A, I would present to student services that this question is invalid, and that one of the following remedies should be taken:

• Every student taking this test gets this question marked right.
• Every student taking this test who answered either A or C gets this question marked right.
• This question is removed from the test's scoring entirely (e.g. if the test had 5 questions, each of the remaining 4 questions would comprise 25% of the test score instead of 20%).
• The teacher is compelled by school policy to explain how to properly interpret the use of "OR" in a multiple choice answer. He must also ensure that every test containing a multiple choice answer that uses "OR" matches the explanation he has previously given in terms of which choice(s) are considered correct, or in the event that a test contains an multiple choice answer that uses "OR" in a manner that contradicts his previous explanation of "OR" usage, he is compelled to explain how the usage of "OR" in that particular test differs from his previously-provided interpretation. (He may simply opt to expunge all instances of "OR" from all other tests he administers.)

However...
Depending on how significantly this answer affects your overall grade for the test, the semester, and the class overall, it may not be worthwhile to pursue it.