Concept:Each operation causes a net transfer of water from vessel N to vessel M.Explanation:Pail A holds 1 litre.Pail B holds half as much as A, so it holds 21​ litre.In one operation, pail A transfers 1 litre from N to M.Then pail B transfers 21​ litre from M back to N.So net water gained by M in one operation is:1−21​=21​ litreAfter 40 operations, water gained by M is:40×21​=20 litresSince the vessels are identical, their water levels become equal when each contains half of the total water.Thus, at equality, M has 20 litres and N also has 20 litres.Total volume of water in the system:20+20=40 litresAnswer:40 litres (Option C).