Re: How to answer this?
"Never mind" is the correct answer, but your confusion comes from your misunderstanding of how it's used.
If I apologize to you for, say, bumping into you, I would not expect "Never mind" as a response.
A: I'm sorry about that.
B: Oh, it's nothing, don't worry about it.
B: It's quite all right
B: It's okay.
B: It's no problem - really.
B: Thank you. I appreciate your apology
but not: Never mind (At least, not in American use.)
"Never mind" means "you don't have to do anything."
A: Have you seen my glasses? Oh... never mind. They are on top of m head.
A: Please take out the garbage. Oh, never mind. I see John did it before he left for school.
A: Get cat - he's stuck in the tree. Oh... never mind. He's jumped down.
Even: A: Would you please [do X]. After no response: Oh never MIND! I"ll do it myself! (Annoyed)
I'm not a teacher, but I write for a living. Please don't ask me about 2nd conditionals, but I'm a safe bet for what reads well in (American) English.