Which sentence uses 'its' correctly in terms of possessive pronoun?

The choice that correctly uses "its" as a possessive pronoun is the one that states, "The dog chased its tail happily." In this context, "its" signifies that the tail belongs to the dog, making it a possessive pronoun that correctly indicates ownership without an apostrophe.

In contrast, the other sentences use "it's," which is a contraction for "it is" or "it has," rather than a possessive form. This common confusion can lead to grammatical errors, as possessive pronouns do not require an apostrophe. Therefore, the use of "its" in the sentence about the dog accurately reflects the possessive nature of the pronoun, indicating that the tail is specifically belonging to the dog.