You have identified a mutation in a gene which also seems to decrease transcription of another gene 2000 bp away from the mutation site. what regulatory sequence, which may be found within another gene, has likely been mutated in this instance?

Mutation of a gene that results in decreased transcription of another gene somewhere else sounds like it's likely an activator...so perhaps it no longer binds and activates transcription.
But the question seems confusing because then it asks about which regulatory sequence has been mutated...so are there 2 mutations? 
Activators and repressors bind to operators - specific sequences in the promoter region of a gene. If you get a mutation in an operator sequence, its transcription factors can't bind (or could potentially bind too well, or bind transcription factors that aren't supposed to bind). So mutations can cause disruption to proper gene expression.

Air occupies

Cbecause it is the only one describing a habitat