Each time \(10\%\) of the mixture is substituted with pure adulterant (water), the concentration of the mixture decreases to \(90\%\) of its initial concentration.
Likewise, when a proportion \(p\) of a mixture is substituted with pure adulterant, the concentration of the resulting mixture becomes \((1 - p)\) times the previous concentration.
Where, \(p = \frac {4}{40} = 0.1\)
Initially, the mixture contains pure milk, resulting in a concentration or strength of \(100\%\) or \(1\) (in terms of proportion). After undergoing the substitution process \(n\) times, the concentration of milk in the mixture will be represented by the expression \(1 \times (0.9)^n\).
To ensure that the volume of milk is lower than the volume of water, p should be less than \(0.5\).
Consequently, we aim to find the smallest n that satisfies this condition.
\(1 \times (0.9)^n<0.5\)
This is possible only when the value of \(n = 7\).
So, the correct option is (B): \(7\)