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Answer (D) is correct . With excess capacity, production is profitable if the incremental revenues are greater than the incremental costs. Here, the incremental costs equal total costs minus any fixed costs ($17.10 – $1.50 – $2.20 = $13.40). If Product B can be sold for a price greater than $13.40, short-run production will be profitable. Long-run profitability, however, will depend on fixed costs as well as variable costs and sales price.

Answer (A) is incorrect because The cost for Product B in the short run will be lower than $17.10 because the fixed costs of $3.70 would not be included in the incremental cost of Product?B.
Answer (B) is incorrect because Product B would be profitable at a $15.60 selling price.
Answer (C) is incorrect because In the short run, the fixed expenses and overhead do not need to be included in the cost of Product B because they are all covered by Product A.