James,
If a continue statement with label identifier (label1 in your example) do not have a immediately enclosed statement
as
while, do, or for statement than compile-time error occurs
Keeping above JLS rule in mind, In your example if you put statement (B) then it will contradict the rule mentioned above. hence option B is incorrect.
In fact option A is also incorrect. It will also give compile error by the same token
Have you tried compiling the code ? I tried using JDK1.2.2
-Sandeep Nachane
www.tipsmart.com [This message has been edited by Sandeep Nachane (edited June 06, 2001).]