The sentence that uses the word settled incorrectly is the last option - D. Mavis decided that small-town life was settled. In A, the word settled is used in the context of - decided. In B, settled means fell. In C, settled means - moved. So, the sentence that uses this word incorrectly has to be D, because we are not quite sure what it means here - the sentence needs to be changed a bit so as to use the word in the appropriate manner.
