Would this problem not be (D) because we don't know if line PQ is the diameter or not?

GRE Quant Problem Solving
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2

“Three circles with their centers on segment PQ”

3

But can’t a segment be lower or higher than the diameter and still have 2 circles with their centres on that line?

4

I don’t understand what you mean by “lower or higher than diameter”. Any line segment that contains the center of the circle is automatically a diameter.