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When setting up load balancing for two Azure virtual machines, the architecture allows for effective resource utilization while maintaining high availability. The correct approach would involve utilizing a single public IP address for the load balancer that manages the distribution of incoming traffic to the two virtual machines.

In this setup, the virtual machines themselves can each have a private IP address, which is sufficient for internal communication within the Azure network. The load balancer receives public traffic at its single public IP address and then directs that traffic to either of the virtual machines based on the defined load balancing rules. This configuration minimizes the number of public IP addresses required while still ensuring that users can access the service effectively.

Therefore, only one public IP address is necessary to facilitate the load-balancing function, while both virtual machines can operate with their private IP addresses without needing individual public IPs. This arrangement is efficient and aligns with best practices in Azure for managing load balancing while caring for resource allocation.