How to dilute a stock solution when the resulting solution has a smaller volume?
Maybe the question was posed this way to make you think practically.  

Approach this problem as if you were in a lab and you actually had a bottle of $2.0~\mathrm{L}$ of a $0.85~\mathrm{mol/L}$ magnesium hydroxide stock solution, and you wanted to make a new solution of $200.0~\mathrm{mL}$ of $0.30~\mathrm{mol/L}$ magnesium hydroxide.

You do not need to dilute the entire stock, but just a portion of the stock solution.  Describe what volume of stock solution you would take out, and how you would dilute it, using the $$c_1 V_1 = c_2 V_2$$ formula, to reach $200.0~\mathrm{mL}$ of $0.30~\mathrm{mol/L}$ of magnesium hydroxide.