Which of the following is a good exit criterion from system testing?

Choosing the resolution of all severity 1 defects as an exit criterion from system testing is an effective strategy because it prioritizes the most critical issues that could severely impact the system's functionality or user experience. Severity 1 defects typically refer to failures that cause complete system shutdown or render the application unusable, making their resolution essential before the software is released.

Focusing on resolving these high-severity defects ensures that the core functionalities are stable and perform as expected, thus minimizing risks for end users. This critical criterion also aligns with risk management best practices since addressing severe problems reduces the likelihood of significant disruptions after release. Consequently, ensuring that all high-severity defects are fixed establishes a solid foundation for system reliability and customer satisfaction.

While completing all tests and fixing all defects are important aspects of testing, they might not be pragmatic or necessary depending on the project context or timelines. Similarly, spending the entire project budget does not guarantee the software's quality and can lead to resource wastage without necessarily addressing critical issues.