The correct statement is:
"In first-person narration, the story is told by a character in the story, and third-person narration uses a point of view from outside the narrative."
This accurately describes the distinction between first-person and third-person perspectives. First-person narration involves a character within the story recounting events using "I" or "we," while third-person narration is told from an external viewpoint, using "he," "she," or "they."