A dipeptide, "x" on complete hydrolysis gives "y" and "z". "y" on treatment with aq. HNO2 produces lactic acid. On the…

Step 1: Finding 'y' — Alanine upon treatment with nitrous acid yields lactic acid ($2\text{-hydroxypropanoic acid}$). Thus, 'y' is alanine.

Step 2: Finding 'z' — The cyclic structure shown in the image is a diketopiperazine formed from two units of glycine through dehydration. Thus, 'z' is glycine.

Step 3: Conclusion — Since the dipeptide 'x' hydrolyzes into alanine and glycine, 'x' must be alanine-glycine. Correct option is (b).

Remember: $\alpha\text{-amino acids}$ react with $\ce{HNO2}$ to form $\alpha\text{-hydroxy acids}$ with the release of nitrogen gas.