The answer is given B. But why cant it be C after all formation of cyclopropane would increase angle strain?
The first thing you notice is an alcoholic base reacting with a molecule. The base looks for the most acidic hydrogen in the molecule. Since the no.of moles of $alc.KOH$ is not mentioned, we go for both the acidic hydrogens at the adjacent positions to the carbonyl functional group. Once the acidic hydrogens are abstracted, it's a simple elimination of $Cl$ that will happen.
I agree with the comment made by @Waylander as there are plenty of examples with three-membered rings. Well, (c) is not possible but you can say (a) is a possibility. Of course (a) forms too by a simple elimination reaction but the most probable one is the abstraction of acidic hydrogen in the molecule. The stability of rings can be brought about by banana bonds.