If the US domestic supply curve were to intersect the vertical axis at a price above P instead of at P1, the American supply curve would become horizontal. The Option C is right.
When the domestic supply curve is vertical, it means that the quantity supplied remains constant at a specific price regardless of changes in demand. In this case, even if the price increases above P, the quantity supplied by American producers would not change. This results in a perfectly horizontal supply curve.
This is opposite to a downward-sloping supply curve that indicate that as the price increases, the quantity supplied by American producers also increases.
The other options such as U-shaped, L-shaped or kinked supply curves do not accurately represent the scenario described where the domestic supply curve hits the vertical axis.
Therefore, the Option C is the correct answer.
Note: The full question and graph is attached as picture below.