If there are multiple words, each word is alphabetized separately. For example, "a c" comes before "ab" because "a" would come before "ab," but "ac" comes after "ab."
I specifically made this quiz to have no hints for people who are trying to specifically memorize the exact order of all capitals to make quizzes where capitals are listed in alphabetical order easier. Countries in alphabetical order already exists, and capitals in alphabetical order also exists but they all give hints.
Great challenge; thought I might have got the point for "Tarawa" and "Sri Jayawardenapure Kotte" - pretty hardline there but maybe there's no easy way to incorporate things like that. Good stuff anyway.