Part 107 does not name a single lost-link mode. Section 107.19(c) requires the remote pilot in command to ensure the small unmanned aircraft will pose no undue hazard to other people, other aircraft, or other property if control is lost for any reason. Section 107.49 requires the people in the operation to be briefed on contingency procedures before flight. The failsafe you brief is the one the aircraft will actually fly, commonly return-to-home, hover, or auto-land, and a return-to-home altitude has to clear the obstacles you surveyed.
The rule is the outcome, not a button name
Before flight, the remote pilot should know the aircraft's lost-link failsafe. The behavior the question keys is a command to return-to-home, hover, or auto-land. Instantly shutting off all motors is not that typical failsafe, and neither is a handoff of control to air traffic control. ATC does not fly your quadcopter because the link dropped.
Which of those three you get is a manufacturer setting and a preflight choice, not a sentence in Part 107. One airframe returns to the recorded home point. Another holds position. Another lands at the spot where the link died. If you have not read the manual and confirmed the setting, you do not know which contingency you are briefing. "It will probably come home" is not a briefing.
Section 107.19(c) is the standard you test that setting against. If the failsafe flies the aircraft through a crowd, into a tower, or across a runway, the remote pilot has not ensured that a loss of control poses no undue hazard. The remote pilot's broader duties are on the remote pilot in command page. The preflight list that includes this briefing is preflight familiarization.
Section 107.49(b) is the briefing rule. Everyone directly participating must be informed about operating conditions, emergency procedures, contingency procedures, roles, and hazards. Lost link is a contingency. The crew should know what the aircraft will do, who will keep eyes on it, and what "land" means if someone still has a link.
Return-to-home altitude is set from the survey, not from a fixed FAA number
Return-to-home altitude should be above the tallest nearby obstacle you surveyed, so the aircraft climbs clear of obstacles before it flies home rather than into them. A low setting can drive the aircraft into a structure on the way back. That is the reason the question gives. The FAA does not publish a required return-to-home altitude, and the question's wrong answers include "because the FAA sets a fixed RTH altitude." There is no such number to memorize. Raising the altitude to stretch flight time is also not the reason.
"Above the obstacles" still has to live inside the other rules. Section 107.51's 400-foot limit, and any lower ceiling on an airspace authorization, still apply to the path the aircraft will fly without you. A return-to-home climb that would bust a LAANC grid or the 400-foot cap is a plan you fix on the ground, by moving the home point, changing the route, or not launching. Do not invent a magic altitude that is both "always legal" and "always above everything." Survey the cranes, the light poles, and the tree line, set the altitude above those obstacles, and confirm that path is one you are allowed to fly.
Interference is a lost-link cause you can see before launch
Most small unmanned aircraft use the 2.4 GHz and 5.8 GHz bands for control and video. Those bands are shared with Wi-Fi and a lot of other unlicensed devices. The question keys the result of operating in a crowd of them: radio interference and possible control-link loss. It does not lengthen battery life, and it does not make the aircraft climb on its own.
Stadiums, downtown rooftops, and event sites are the usual places this shows up. If the link is already marginal on the ground, the failsafe is no longer a remote possibility. You either change position, change equipment as the manual allows, or you delay. The contingency briefing should include interference as a reason the link might die, not only a dead battery or a flown-behind-a-building geometry.
A crane on the way home
You are inspecting a facade. The home point is the landing pad in the parking lot. Between the building and the pad, a mobile crane is working, and you measure it as the tallest obstacle on the return path. You set return-to-home above that crane so a lost link climbs clear and then tracks home, instead of cutting across the boom. You tell the visual observer what the aircraft will do if the link drops, which satisfies the contingency piece of the §107.49 briefing, and you confirm the climb still respects the altitude you are allowed to fly.
You also notice the site is thick with 2.4 GHz cameras and access points. You treat that as a link risk, not as a curiosity. If a test hover already shows dropouts, you do not start the facade pass and hope. The failsafe is the backup. It is not a reason to launch into a known interference problem.
If the link does drop and the aircraft flies the briefed path, you keep it in sight and you keep people clear. If something about that path becomes an immediate emergency, §107.21 is the deviation authority, covered with in-flight emergency procedures. A lost link by itself is the contingency you already planned. It is not an invitation to invent a new altitude in the air.
The trap
The failsafe trap offers a motor cutoff or a transfer to ATC. The keyed behavior is return-to-home, hover, or auto-land. Know which one is set.
The altitude trap offers a fixed FAA return-to-home height, or a higher setting for endurance. The keyed reason is obstacle clearance: climb clear, then come home, rather than flying into the structure. Set it from the survey.
The spectrum trap treats a crowd of 2.4 GHz and 5.8 GHz devices as harmless or helpful. The keyed result is interference and a possible loss of the control link.
Practice the contingency items on the free practice test. The operations lessons in the course put the failsafe next to the §107.19(c) hazard rule so the button and the regulation stay tied together.