C is the answer
https://www.cisco.com/c/en/us/support/docs/quality-of-service-qos/qos-policing/19645-policevsshape.html#:~:text=traffic%20shaping%20retains%20excess%20packets%20in%20a%20queue%20and%20then%20schedules%20the%20excess%20for%20later%20transmission%20over%20increments%20of%20time.%20The%20result%20of%20traffic%20shaping%20is%20a%20smoothed%20packet%20output%20rate.
Traffic policing propagates bursts. When the traffic rate reaches the configured maximum rate, excess traffic is dropped (or remarked). The result is an output rate that appears as a saw-tooth with crests and troughs. In contrast to policing, traffic shaping retains excess packets in a queue and then schedules the excess for later transmission over increments of time. The result of traffic shaping is a smoothed packet output rate.
Think it is D:The question says - saturated link that has traffic shaping configured. How is incoming traffic processed.
Shaping is configured on the outbound interface and Policing is Inbound interface, so the question is about policing. It is not B because Policing does not use Queue.
It's C, will queue packets for retransmission before it drops them.
But based on this "How is incoming traffic processed?" I would say shaping is applied to the egress so this question doesn't make sense.
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