What is the right course of action here?

You answered correctly. The rule here is based on the yield (give way) sign visible on the right side of the image. This means you must yield to all traffic on the priority road before entering or crossing it. In this situation, the green car is already on the priority road and therefore goes first. The red car, turning left, is also coming from the priority road and goes ahead of you. You must wait for both the green and red cars before proceeding. That’s why it is correct that the green car may go ahead of the red car, and you cannot proceed ahead of either. This scenario tests your understanding of priority roads and the requirement to yield when entering them. Always check for these signs so you know when to give way.