The stimulus tells us that genuine happiness consists in one's sense of approval of one's character and projects. It then concludes that the happy life tends to be the good life, where the good life is understood as a morally virtuous life. What we need is a link between moral virtuousness and self-approval of one's character and project, and this is exactly what (B) gives us.
(B) tells us that people who have this self-approval tend to lead morally virtuous lives. Because they have this self-approval, these people are genuinely happy. Similarly, because they lead morally virtuous lives, they lead good lives. Thus, these people live both the happy life and the good life. Hope this helps!