Statement — The Government has decided not to reduce the prices of petroleum products despite a significant fall in international crude prices. Assumptions — I. International crude prices may rise again in the near future. II. Maintaining current product prices provides a buffer to handle possible future increases.

Introduction / Context:Choosing not to pass through a cost decrease suggests caution about future volatility and a desire to build fiscal/price buffers. Such a stance presupposes a risk of price rebound and a policy of smoothing prices over time.

Given Data / Assumptions:

• Observed: crude prices have fallen significantly.
• Decision: retail prices unchanged.
• I: crude may rise again soon.
• II: holding prices now helps withstand later increases.

Concept / Approach:Price-smoothing policy logic: do not reduce retail prices fully when input costs fall, so as to avoid sharp hikes when costs rebound; use the margin as a buffer or for fiscal needs.

Step-by-Step Solution:

Verification / Alternative check:If crude were expected to keep falling and buffers were unnecessary, a reduction would be more plausible; the decision contradicts that, so I and II support it.

Why Other Options Are Wrong:

Common Pitfalls:Confusing political motives with logical presuppositions; the question asks what must be assumed, not why the government “should” do it.

Final Answer:Both Assumption I and II are implicit.