Dismissed from PhD program and reapplying; how to answer question about dismissal?
The fact that you were not allowed to continue toward the Ph.D. is not "dismissal" in the sense that that question means.  (I can certainly see how the terminology could be confusing though.)  The question is there to identify students who have been involved in academic (or other) misconduct.  Academic failure does not fall into the misconduct category, so you should answer "No" to the question.  Doing so will not imperil your application in any way.