When the south poles of two bar magnets are brought closer together, they repel each other. As they move from 10 cm apart to 5 cm apart, the system's potential energy decreases because they are moving into a position of higher interaction energies due to the repulsive force.
After they are brought to 5 cm apart and then moved back to their original position (10 cm apart), the potential energy of the system increases again as they are being moved back to a state where the like poles are farther apart and the repulsive force is reduced.
Therefore, the correct response here is:
The potential energy of the system first decreases and then increases.