It's a bad question. For one thing, answer (C) is utter nonsense. (Maybe that's a bit harsh. It might be just regular nonsense.) In order for something to convert gravitational potential energy into kinetic energy, it has to drop to a lower height under the influence of gravity. This does not happen during a collision. Collisions in physics are effectively instantaneous events; they occur at one point in space and time and then they're over and done with. There is no change in height by which GPE could be converted into KE during the collision. Whatever (kinetic) energy the balls run away with, they had to obtain it from the kinetic energy that the cart had coming into the collision.
Now, the kinetic energy of the cart at the point of the collision was converted from the gravitational potential energy that the cart had higher up the ramp. But that conversion was done by the cart alone; the balls had nothing to do with it.
The other reason I don't like this problem is that they don't tell you at which point on the ramp the cart has the speed of $5\text{ m/s}$. It's possible that the cart maintains a constant velocity as it goes down the incline, but that would require some mechanism to keep the cart from accelerating, and if some such mechanism is involved, it should be mentioned in the problem. If that is the case, the gravitational potential energy that the cart started out with would have been converted into some other form of energy, not kinetic. It might be heat, electricity, spring energy, etc. but there's no way to know unless they tell you what mechanism is keeping the cart from accelerating.
In a pinch, if you encountered this problem on the test and didn't have any opportunity to ask for clarification, I would just assume that $5\text{ m/s}$ is the speed at the end of the ramp, immediately prior to when the cart hits the balls. Why? The alternative is that the problem is unsolvable. If the speed of the cart coming into the collision is not $5\text{ m/s}$, you have no other information that would allow you to calculate what it is. (Self-check: do you understand why this is the case?)
Once you assume that the speed of the cart coming into the collision is $5\text{ m/s}$, you have a collision of 3 objects, each of which has a mass and initial and final velocities. All 3 masses, all 3 initial velocities, and two of the final velocities are known, so you should have enough information to solve for the third. If you don't find any solution, then the situation is impossible and the answer is (D); on the other hand, if you do find a solution for the final velocity of the cart, then that velocity will distinguish between choices (A) ($v_f = 0$), (B) ($v_f < 5\text{ m/s}$), and (C) ($v_f = 5\text{ m/s}$, if you ignore the stuff about energy being converted).
What is the difference that leads to
conservation of kinetic energy in elastic collision ?
The difference is only in the properties of the material of a body. If it is elastic (happy ball) it can deform itself (thus absorbing KE) and then recover the original shape, giving back roughly the same amount of KE, which is considered as temporarily stored in the lattices: this question can be of help to you if you want a deeper insight.
You saw this image here: If a body is not elastic (sad ball) the KE will deform the body and this change is irreversible, the KE will be transformed into heat, sound etc. and will not be available anymore as mechanical energy. In this video you can see the enormous difference between a sad and a happy ball of same mass and momentum. If the concept of impulse is not clearly explained there this answer can be of great help
Why is
mechanical energy converted as total energy is conserved in inelastic
collision?
Kinetic energy is transformed into an exactly equal quantity of other forms of energy in inelastic collisions, therefore the total energy of the system does not change: KE is not conserved whereas momentum is, but energy in general is conserved anyway
Best Answer
Noether's theorem states that to every continuous symmetry of a physical system there is an associated, conserved quantity. The conserved quantity associated with time translation invariance (i.e. it doesn't matter if you perform an experiment now or tomorrow, provided you set it up the same way) is what we call energy.
Therefore, somewhat tautologically, it cannot happen that energy is not conserved (in classical mechanics, anyway). Your scenario a) is avoided by definition. Let the Feynman speak:
If the stuff we currently think of as energy is not conserved in time, then we must conclude that there is "a form of energy" yet unknown to us (your scenario c)). Kinetic energy is not wrong because you can simply derive the Noether charge/energy of a freely travelling particle and see that it is indeed the kinetic energy we know. You might object and say that "kinetic energy" might need to be redefined to include the new term instead of calling it something new - but then again, the partitioning of the energy into "different kinds" is artifical anyway, since, from the Noetherian perspective, there's just energy, i.e. that which is conserved.