Jo: Why do they saying not to wear a mask?
Al: They don’t want medical staff to lack them.
Jo: That’s __?
Al: Masks aren’t perfect.
Jo: And they make us too confident?
Al: Yes.
Jo: Shouldn’t they say, ‘just be careful and don’t buy too many?’
Al: Of course!
Choose:
that
it
Note: “They” is often used without describing the subject (the people speaking or the people who spoke) and refers to the government, the media or some other authority, as in “They want people to stay home during the pandemic,” or “They’re building a new road out by the old mill.”
The answer is ‘it,’ because “that’s that” means “finished,” or there’s nothing more (to say/do/hear/deal with).