The correct answer is:
D. The relative pronoun is that; it functions as part of the adjective clause.
The pea green sofa is the subject of the sentence. That used to sit in my collage dorm is an adjective clause, because it adds more information and provides a description of that subject, without changing the basic meaning of the sentence. That is a relative pronoun, and these pronouns are used to introduce this type of clauses.
