I would say the correct answer is D. Austria-Hungary would no longer exist if every ethnic group got its own independent territory.
As you can see, Austria-Hungary consisted of many ethnic groups at the time, including Germans, Poles, Slovenes, etc. What this meant for the nationalism is that each of these ethnic groups wanted their independence and to separate from Austria-Hungary. And if they did that, there would no longer be Austria-Hungary, but rather a bunch of new countries in Europe.