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When a vessel is restricted in its ability to maneuver, it must display specific signaling signals to communicate its status to other vessels. The correct choice of displaying an alternating red and yellow light is aligned with the International Regulations for Preventing Collisions at Sea (COLREGs). This signaling is crucial for ensuring that other vessels are aware of the restricted status of the maneuvering vessel, thereby helping to prevent collisions and ensuring safe navigation.

The alternating red and yellow light serves as a clear indication to other vessels that they must exercise caution when interacting with the restricted vessel, which may not be able to turn or maneuver as easily as a normal vessel. This could be due to various reasons, such as the presence of tow, being aground, or performing work that limits its ability to navigate.

In contrast, the other options—a flashing white light, a flashing red light, or a steady white light—do not correctly represent the signaling requirements for a vessel that is restricted in maneuverability, thereby failing to communicate the necessary information to surrounding vessels effectively. Understanding and applying these signaling protocols is essential for safe marine operations and legal compliance.