Step 1: Understand the concept of fundamental and realized niches.
The fundamental niche is the potential environment a species can occupy and propagate in, given its physical and biological tolerances (depicted by the rectangle P).
The realized niche is the actual environment a species occupies, taking into account factors such as competition and predation (depicted by the circle Q).
Step 2: Analyze the given information.
In the figure, P represents the broader range of temperature and rainfall in which the species could survive (fundamental niche).
Q represents the narrower range within P, indicating the actual environmental conditions the species inhabits (realized niche).
Thus, the correct answer is option (A).