The answer is C.
C. From the Diagnostic settings of SQLMI1, select Send to Log Analytics.
To implement alerts by using Azure Monitor, the best approach is to send diagnostic data from the Azure SQL managed instance to Log Analytics. This approach meets both requirements, as it aggregates telemetry data from each database and minimizes costs. With Log Analytics, you can centralize and analyze diagnostic data from different sources, including Azure SQL Managed Instances, and set up alerts based on specific conditions.
Option A would require setting up diagnostic settings for each database individually, which can be time-consuming and difficult to manage. Option B would require creating an event hub for each database, which could result in increased costs and complexity.