The correct answer is D. The issue is primarily caused by the high CPU utilization of the EC2 instances, which indicates that the instance type might not be sufficient to handle the load. To resolve this and enable scaling based on demand, routing incoming requests to Amazon SQS and configuring an EC2 Auto Scaling group based on the queue size is an effective approach. This allows the system to handle varying workloads more efficiently by adding or removing instances based on the actual demand, thereby improving performance and scalability.