Market efficiency - Question 88 AM session mock exam

efficiency, efficient, investor, question, correct

The question:
After the public announcement of the merger of two firms an investor makes abnormal returns by going long on the target firm and short on the acquiring firm. This most likely violates which form of market efficiency?
A) Semi-strong form only (this is the answer I chose)
B) Weak and semi-strong forms
C) Semi-strong and Strong forms
Correct Answer (according to the answer key): B is correct. In a semi-strong efficient market, prices adjust quickly and accurately to new information. In this case, prices would quickly adjust to the merger announcement and if the market is semi-strong efficient market, investors acting after the merger announcement would not be able to earn abnormal returns. Therefore, it is a violation of the semi-strong form of market efficiency. Note that the semi-strong form of market efficiency encompasses the weak form. Therefore, both weak and semi-strong forms of market efficiency are violated.
I’m totally confused by that answer. Semi-strong forms do assume that markets react quickly and accurately to new information. Hence, the abnormal profit is a violation of semi-strong form efficiency.
How was weak efficiency violated? This requires only that past price and volume information is known. Hence the arbitrage profit can be made from the merger information, because prices do not reflect the new information.
ACTUALLY, strong form efficient markets assume market prices reflect public and private information so, the REAL answer to this question should be C. The announcement of the merger should have no price effect in a strong efficient market because the prices should have already accounted for the information (even before it was made public).
Am I thinking about this the wrong way or maybe this question is a typo?