For the requirements you've outlined, you should use:
B. the serverless compute tier
Here's how it aligns with your requirements:
Dynamically scale CPU resources: The serverless tier automatically scales compute resources based on workload demand, and you only pay for the compute resources you use.
Ensure that the database can be paused to reduce costs: One of the key features of the serverless tier is the ability to automatically pause the database during inactive periods to save costs, and then automatically resume when activity picks up again.
B is correct,
Serverless is a compute tier for single databases in Azure SQL Database that automatically scales compute based on workload demand and bills for the amount of compute used per second. The serverless compute tier also automatically pauses databases during inactive periods when only storage is billed and automatically resumes databases when activity returns. The serverless compute tier is available in the General Purpose service tier and currently in preview in the Hyperscale service tier.
above statements from below link
https://learn.microsoft.com/en-us/azure/azure-sql/database/serverless-tier-overview?view=azuresql&tabs=general-purpose
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