Take the case given in figure(B)
From law of continuity
When the area of cross-section in the middle of the venturi meter is small,the speed of the flow of liquid through this part is more.According to Bernoulli's principle,if speed is more,the pressure is less.
Pressure $\propto$ height
Hence level of water in pipe 2 is less.
So (A) is correct,(B) is incorrect.
Hence (B) is the correct answer.