Answer:
C). Some of the toys are magical.
Step-by-step explanation:
A 'Fantasy' is characterized as the literary genre that primarily deals with the themes of magic and supernatural elements such as imaginary worlds and creatures that people usually fantasize about. In the given excerpt, the description of 'magical toys' signals the readers that it belongs to the fantasy genre. The other details like 'toys coming from Mountain, Dale, and of real dwarf-make' further hints of a fictional and unrealistic world that the author is presenting. Thus, option C is the correct answer.