The correct answer is option 'B', a network layer firewall works as a packet filter. Let's understand why:

Packet Filter:
A packet filter is a type of firewall that operates at the network layer (layer 3) of the OSI model. It examines the source and destination IP addresses, source and destination ports, and other parameters of each packet passing through it. Based on a set of predefined rules, the packet filter determines whether to allow or block the packet from passing through.

Working of a Network Layer Firewall:
A network layer firewall examines each packet that passes through it and applies a set of rules to determine whether to allow or block it. It does this by analyzing the packet header information, including source and destination IP addresses, source and destination port numbers, and other protocol-specific parameters.

Advantages of a Network Layer Firewall:
1. Granular Control: A network layer firewall provides granular control over network traffic by allowing administrators to define specific rules for packet filtering. This allows organizations to enforce their security policies and restrict access to specific resources or services.

2. Improved Performance: Since a network layer firewall operates at the network layer, it can process packets more efficiently compared to higher-layer firewalls. It filters packets based on their header information, making it faster and more scalable for handling large amounts of network traffic.

3. Protocol Independence: A network layer firewall is protocol-independent, meaning it can filter packets for various protocols such as TCP, UDP, ICMP, etc. This allows organizations to protect their networks from different types of attacks and vulnerabilities.

4. Flexibility: Network layer firewalls can be implemented using dedicated hardware appliances or software-based solutions. This provides flexibility in choosing the right firewall solution based on the organization's requirements and budget.

Conclusion:
In summary, a network layer firewall works as a packet filter by examining the header information of each packet and applying a set of rules to determine whether to allow or block it. It provides granular control, improved performance, protocol independence, and flexibility in protecting the network from unauthorized access and potential threats.