Statement I: Just before setting, the sun may appear to be elliptical. This happens due to refraction.
Statement II: Refraction of light ray through the atmosphere may cause different magnification in mutually perpendicular directions.

detailed solution

Correct option is A

When the sun is close to setting, refraction will affect the top part of the sun differently from the bottom half. The top half is being seen through optically rarer atmosphere and hence the refracted ray bends little , while the bottom portion will send an apparent image. Since the bottom portion of sun is being seen through thicker; more optically denser  atmosphere. The bottom image is being bent intensely and gives the impression of being squashed or "flattened" or elliptical shape.