**Core Concept**
The premature baby is experiencing respiratory distress due to underdevelopment of the lung tissue and surfactant deficiency, leading to alveolar collapse and decreased lung compliance.

**Why the Correct Answer is Right**
Surfactant therapy is the best management for this premature baby with respiratory distress due to surfactant deficiency. Surfactant is a complex mixture of phospholipids and proteins that reduces surface tension in the alveoli, preventing alveolar collapse and improving lung compliance. This is crucial for premature babies, as they have underdeveloped lungs and are at high risk of developing respiratory distress syndrome (RDS). Surfactant therapy has been shown to decrease the incidence and severity of RDS, reduce the need for mechanical ventilation, and improve outcomes in premature babies.

**Why Each Wrong Option is Incorrect**
**Option A:** This option is incorrect because nasal continuous positive airway pressure (CPAP) may not be sufficient to prevent alveolar collapse in a premature baby with surfactant deficiency. While CPAP can help improve lung compliance in some cases, it is not the best management for this scenario.
**Option B:** This option is incorrect because corticosteroids may take several hours to have a therapeutic effect, and they do not directly address the surfactant deficiency. While corticosteroids can help accelerate fetal lung maturation, they are not the best immediate management for a premature baby with respiratory distress.
**Option C:** This option is incorrect because mechanical ventilation may not be necessary if surfactant therapy is administered promptly. In fact, mechanical ventilation can sometimes exacerbate lung injury in premature babies, making surfactant therapy a better initial management option.

**Clinical Pearl / High-Yield Fact**
Premature babies born at less than 28 weeks gestation are at high risk of developing respiratory distress syndrome (RDS) due to surfactant deficiency. Administering surfactant therapy promptly can significantly improve outcomes and reduce the need for mechanical ventilation.

**Correct Answer:** C. Surfactant therapy