What does this traffic sign combination indicate?

You answered correctly. This sign marks the end of a traffic-calming zone (Spielstraße or "verkehrsberuhigter Bereich"), where special rules apply, such as walking speed for vehicles and priority for pedestrians. After this sign, normal road rules resume. It does not indicate a pedestrian zone or a children's playground, so answer 1 is the correct choice. Recognizing this sign helps you know when the special right-of-way and low-speed rules are no longer valid.