What should the solutions architect do to reduce the overall data transfer costs?

Explanations:

Placing EC2 instances in an Auto Scaling group helps with scaling based on demand but does not directly affect data transfer costs between instances or S3.

While placing EC2 instances in the same AWS Region can reduce costs related to cross-region data transfers, it does not guarantee lower data transfer costs, especially if instances are in different Availability Zones within the same region.

Placing all EC2 instances in the same Availability Zone ensures that data transfer between them is done over a local network, which is significantly cheaper than transferring data between different Availability Zones. This approach minimizes costs associated with data transfer.

Placing EC2 instances in private subnets in multiple Availability Zones may enhance availability and redundancy but does not reduce data transfer costs. Intra-AZ transfers are cheaper than inter-AZ transfers, making this option less cost-effective compared to option C.