Answer
(a) increase
(b) II
Work Step by Step
(a) We know that $P=\frac{V^2}{R}$. This equation shows that the power dissipated is inversely proportional to the resistance. In the given scenario, the overall resistance of the circuit is reduced due to the short circuit of resistor 2. Thus, the power dissipated is increased when the switch is closed.
(b) The best explanation is option (II) -- that is, the equivalent resistance of the circuit is reduced by closing the switch, but the voltage remains the same. Therefore, from $P=\frac{V^2}{R}$, we see that the power dissipated increases.