Muller observed that mutations can be induced by _____

The correct option is C X-rays

Some forms of radiation cause mutations. These include ultraviolet radiation (UV), x-rays and $\gamma$-rays.

These directly damage the DNA. For example, UV radiation bonds two adjacent thymine bases to each other forming a bulge in the DNA strand. The DNA polymerase will make mistakes in forming the new complementary strand.

X-rays are used to produce mutations in the laboratory. X-rays can produce multiple mutations such as deletions, inversions and translocations, which was first observed by Muller.

So, the correct answer is 'X-rays'