Explanation:
Box 1: Yes
User1 is member of Group1 and Group2.
Policy1 with priority 0 is assigned to Group1: default file format for Excel is.ods.
Policy2 with priority 1 is assigned to Group2: default file format for Excel is.xlsb.
Note: Key points to remember about policy order
Policies are assigned an order of priority.
Devices receive the first applied policy only.
You can change the order of priority for policies.
Default policies are given the lowest order of priority.
Box 2: No
User2 is member of Group2.
Group2 and Group3 are members of Group1.
Box 3: No
User3 is member of Group3.
Group2 and Group3 are members of Group1.
Reference: https://learn.microsoft.com/en-us/microsoft-365/security/defender-business/mdb-policy-order