If there is an object in top of another object, why does the upper object exert a downward normal force?

This is because normal force is exerted perpendicularly to the point of contact between the upper and lower objects.  

Explanation:

This is because the upper object is still subject to gravitational pull. Therefore, the amount of force it exerts on the lower object due to gravity will be equal to the normal force that acts in the negative direction of gravitational force. Additionally, normal force is evident because the upper object will not go into the lower object.

small = small current large mag large current

there are no contact forces mentioned on the list of choices that you've provided.