Step 1: Whether flow is laminar or turbulent is predicted by the Reynolds number (Re): \[Re = \dfrac{D \, v \, d}{V}\] where D is diameter, v is mean linear velocity, d is density and V is viscosity.
Step 2: A high Reynolds number favours turbulence and a low Reynolds number favours laminar flow. Re greater than about 3000 gives turbulent flow, and Re less than about 2000 gives laminar flow.
Step 3: Although each small airway has a tiny diameter, the small airways are extremely numerous, so their total cross-sectional area is very large (not low). Velocity of flow is inversely proportional to total cross-sectional area.
Step 4: Because the total cross-sectional area of the small airways is large, the linear velocity of airflow there is very low. A low velocity gives a low Reynolds number, which keeps the flow laminar.
Conclusion: Small airways have laminar flow because the linear velocity of airflow in them is extremely low, so option C is correct. (Options A and D are factually wrong: laminar flow needs a low Re, and the total cross-sectional area is large.)