What change in colour is observed when white silver chloride is left exposed in sunlight? 

When silver chloride is exposed to sunlight, photons from the sunlight break down silver nitrate into natural silver and chlorine gas.

These types of reactions are known as photolytic decomposition reactions. In these reactions, the reactant molecules are broken down into two resulting molecules or products.

The chemical reactions involved in this process are shown below.
$2\mathrm{AgCl} \left(\mathrm{s}\right) \stackrel{\mathrm{sunlight}}{\to }\mathrm{Ag} \left(\mathrm{s}\right) + {\mathrm{Cl}}_2 \left(\mathrm{g}\right)$
Silver chloride $\left(\mathrm{AgCl}\right)$ is white and elemental silver$\left(\mathrm{Ag}\right)$ is grey.

Therefore, when white silver chloride is exposed to sunlight, the observed colour change is from white to grey, and the nature of the chemical reaction is photodegradation or photodecomposition.

Hence option (C) is correct.