Final answer:
The increase in allolactose levels in E. coli induces the transcription of genes within the lac operon, resulting in increased production of lactose-metabolizing enzymes. The correct option is C.
Step-by-step explanation:
When allolactose levels increase in E. coli, the event that occurs is transcription of genes within the lac operon increases. Allolactose acts as an inducer by binding to the repressor protein and preventing it from binding to the operator.
This allows the RNA polymerase to initiate transcription of the lac operon's genes, leading to the production of enzymes required for lactose metabolism.
The lac operon is also subject to activation through the catabolite activator protein (CAP) when glucose levels are low, further enhancing the transcription of these genes. The correct option is C.