What elements indicate that the Story of The Masque of Red Death occurs only in Prince Prospero's mind?

It is as if the Prince, stricken with the red death, has gone mad and in his stupor from the illness, has a long series of hallucinations in which he imagines the entire plot of the story. The seven rooms represent the various stages in the Prince's life, the giant clock is representative of the time that ticks by as the Prince slowly dies, until it chimes for the last time.

"The seven chambers of the abbey, according to critic H. H. Bell, Jr., in his article '‘‘The Masque of the Red Death': An Interpretation,’’ represent the seven decades of a man's life, so that the final chamber, decorated in red and black, represents death. Bell interprets the seven chambers as ‘‘an allegorical representation of Prince Prospero's life span.’’

"This view is supported by the fact that the first room is located in the East, which symbolizes birth, because it is the direction from which the sun rises, and that the last chamber is located in the West, which symbolizes death, as the sun sets in the West. Bell interprets each of the colors of the seven rooms—blue, purple, green, orange, white, violet— as symbolic of ‘‘Prospero's physical and mental condition in that decade of his life."

All the guests are dressed in ghoulish costumes, chosen by the Prince.  The Prince valiantly confronts the Red Death near the end of the story, only to succumb, along with all his guests.