Biological functions of many plants and animals vary in cycles that

Biological functions have a 24 hour rhythm. It means that every 24 hrs, one would expect a similar phase. For example, if a certain species sleeps in the afternoon at 3, one would expect it to sleep every day in the afternoon at 3. If it hunts at 10 in the morning, one would expect it to hunt every day at 10 in the morning (approximately, of course!)

Hypothesis - Alteration in the intensity of incident light is the stimulus that controls these daily biological rhythms
When incident light is higher, they do certain activities, when lower, they do other activities. The amount of light controls their biological functions.

What can be evidence to contradict the hypothesis?
If we find that even when the amount of light remains the same, they carry on with the 24 hour rhythm, then we can say that the hypothesis is not true. We have to show that amount of light falling does not control the biological functions.

(A) Human body temperature varies throughout the day, with the maximum occurring in the late afternoon and the minimum in the morning.

Doesn't contradict. It just gives us the daily rhythm of human body's temperature. It lights up in the morning so temperature starts rising and reaches maximum by later afternoon. Thereafter, intensity of light starts reducing so body temperature starts falling and keeps falling throughout the night and reaches minimum by morning. Then it starts rising again. Or some such explanation.

(B) While some animals, such as the robin, are more active during the day, others, such as mice, show greater activity at night.

Again, gives us the daily rhythm of robin's activity. It could be related to amount of light.

(C) When people move from one time zone to another, their biological rhythms adjust in a matter of days to the periods of sunlight and darkness in the new zone.

How the body adjusts to sudden changes in the variations in light is irrelevant.

(D) Certain single-cell plants display daily biological rhythms even when the part of the cell containing the nucleus is removed.

What role nucleus has to play, we don't know. If we were told that the nucleus is the one that senses light and the rest of the plant does not, then this would be contradicting our hypothesis. But we don't that anything about nucleus and light. Hence, not correct.

(E) Even when exposed to constant light intensity around the clock, some algae display rates of photosynthesis that are much greater during daylight hours than at night.

Correct. Here we are keeping the light intensity constant. Still we are seeing the daily rhythms. This means the daily rhythms exist not because of changing light intensity but some other reason. This contradicts our hypothesis.

Answer (E)