Either the past simple or the past continuous could both be correct in the sentence you mention. (Especially as you say there is no surrounding context). However in the "context" of the exercise in your English textbook you are expected to put "...was having lunch..." - this is the "correct" answer. Personally, I think it's a bit crazy to take a sentence completely out of context and then force people to decide on tense within that sentence, with no other context apart from: " exercise c) on page 24 of chapter 2 on the past continuous. It's like saying: "sorry the answer can't be past simple because we studied that in chapter 1". Anyway as I said either tense would be correct (as well as a number of other tenses): - Do you know, I think I saw Alison shopping for clothes in town yesterday afternoon". No that's not possible! Alison was having lunch at 2 yesterday. Then we were working together all afternoon. - did you go to the canteen yesterday with Alison for lunch at midday as usual? No, Alison had lunch at 2 yesterday. Context, context....🤔

This is an exercise in the form of past continuous. It is about the form, not context or meaning so your sentence should be, 'Alison was having lunch at...' Grammar books tend to separate things for training purposes. It is like doing a particular stroke in tennis as a drill. In a game, you might use several different strokes, but when you are drilling a specific technique you just work with that one

I never learned tenses

Charlie gave an excellent answer.

The answer is : Alison was having lunch at two o'clock yesterday. In past continuous you are not sure when that thing really began or ended, but you just know that it was happening. Rule of past continuous is: Subject+was/were+verb+ing or subject+ was/were+not+ing.