The correct option is A decreases
Efficiency of a machine means the percentage of input energy that was converted to output energy by that machine.
A completely efficient machine will convert all input energy to output energy without any loss.
Friction causes heating of moving machine parts. When friction opposes the motion of the machine, some part of the input energy is converted to heat instead of converting it to output and therefore is wasted.
Therefore as the output energy decreases because of friction, its efficiency too decreases.
Also friction causes wear and tear of the moving parts. So the machine parts undergo wear and tear over a long period of time after working continuously. So the capacity and hence the efficiency of the machine decreases.