Correct Answer: CTo optimize the performance of a stateless application running on a Compute Engine instance, you should create a custom image from the existing disk. This custom image ensures that the application environment remains consistent across different instances. Next, you create an instance template from the custom image, which specifies the machine type, disk configuration, and other instance settings. Finally, you create an autoscaled managed instance group from the instance template, allowing you to automatically scale the number of instances based on the demand. This approach ensures high availability and performance during peak hours while maintaining cost efficiency during off-peak hours.