Ah, college mathematics.
We must remember there are four quarts per gallon. Let's convert everything to gallons:
3 \frac 1 4 - 1 \frac 3 4 = \frac{13}{4} - \frac{7}{4} = \frac{6}{4} = 1 \frac 2 4
We don't reduce because it's easy to see that's 1 gallon, 2 quarts, third choice.
