Since air resistance is not negligible, there will be a point where the ball reaches it's terminal velocity (maximum velocity). When it reaches this, the force due to air friction will prevent the acceleration due to gravity from speeding up the ball any more. This means that C is the correct choice, as if you can imagine, it takes time for the ball to reach its terminal velocity. When the first ball is dropped, it will reach its terminal velocity shortly, but when the second ball is dropped, the second ball requires time to reach its terminal velocity. The time for the second ball to reach its terminal velocity to match the first ball will increase the distance between them because the first ball is traveling faster than the first ball in this period until the second ball also reaches its terminal velocity. At that point, the distance between the balls will be constant, so long as they continue falling.