Step 1: Formula for magnetic induction.
For a circular arc, the magnetic field at the center is given by the formula:
\[
B = \frac{\mu_0 I \theta}{2r}
\]
Where \( \theta \) is the angle subtended by the arc, \( r \) is the radius, and \( I \) is the current.
Step 2: Substituting the given values.
The angle \( \theta = \frac{\pi}{16} \), so the magnetic induction at the center is:
\[
B = \frac{\mu_0 I \cdot \frac{\pi}{16}}{2r} = \frac{\mu_0 I \pi}{32r}
\]
Thus, the correct answer is (C) \( \frac{\mu_0 I}{64r} \).