If a 35 seat airliner is as uneconomic as you claim maybe you could explain how the DHC6-400 which only seats 19 has a healthy order book.
There are many factors at play here, for example island flights are often subsidised for social and development reasons. Thin feeder routes are often subsidised by the airlines that they feed. Many destinations in remote and less developed areas can only be served by STOL aircraft, etc.