Z: drive is the internal DOSBox drive where built-in tools are located. You cannot install anything to it.

Looks like you are missing a mount command (either in DOSBox configuration file, or run manually) that will mount a local folder as C: in DOSBox. Then you probably want to mount the ISO as D:. It is possible to do it the other way around, but for DOS games/applications compatibility, it is better that "fixed" drives come first, and optical drives come later.

So i finally installed Top Gun: Fire at Will and i ran it, i quit dosbox to see if it would work the second time, i ran dosbox again and i typed mount c /users/student/downloads/topgun, then C:, then i typed Topgun.exe and then it said 'Top Gun not being invoked from Installed directory. Or Top Gun improperly installed or configured'. Is there anyway on how to fix this error

I suppose this game requires the CD to be in the drive? If so, you need to mount both the local directory and the ISO.

Also, your mount command should be the same one you used when you installed the game.

My guess it should be like this:
mount c /users/student/downloads
c:
cd topgun
topgun.exe