Originally Posted by hhEb09'1

It was a trick question. There is no real answer, since it was not worded correctly. Instead of "Which planet's diameter is 40% smaller than Earth" it should have read "Which planet's diameter is 40% of Earth's"

Mars, whose diameter is 47% smaller than Earth's, comes closest to that first criteria (I made the same first guess that you did). Mercury's diameter is actually 62% smaller than Earth's diameter (so it's about 38% (about 40%) of the Earth diameter)