Which of the following statements is true of legends? a. they may have been inspired by real events and real people. b. they are always written in the first person. c. they ridicule or criticize institutions or social conventions. d. they are usually allegories.

Correct  A. They may have been inspired by real events and real people.

Detail:

A legend differs from a myth, in that legends generally do have some element of truth in their background.  There was a real person or some real event far back in history, but as time went on stories about that person or event are magnified and mystical or symbolic elements are added.  

An example would be the legendary stories about King Arthur in Britain.  There is some historical debate, with some suggesting there was no actual historical person behind the legends.  But there are strong suggestions that the Arthur stories are based on a King Arthur in Britain during the era of Roman rule, around the end of the 5th / beginning of the 6th century.

c. bounced back and forth from worthless to worth a lot and back to worthless