What should be the response to a "Torque Sensor Failure?"

Maintaining the current flight path and observing performance is the appropriate response to a "Torque Sensor Failure." This action allows the pilot to continue flight safely while monitoring the aircraft's overall performance. Since the torque sensor is primarily used to indicate the engine's power output and efficiency, the pilot can assess how the aircraft responds to existing power levels without making abrupt changes that could destabilize the flight.

The other options suggest immediate drastic actions or alterations without sufficient justification. For instance, reducing power and modifying flight controls may lead to unintended consequences if the flight performance remains stable, and it could risk losing control of the aircraft. Monitoring for other instrument discrepancies has its merits, but without maintaining the current flight path, this wouldn't provide the necessary focus on the immediate situation. Finally, preparing for an unscheduled landing could be premature, especially if there isn't an immediate threat to the aircraft's performance or safety, and maintaining the flight allows for better assessment of the situation before deciding on a landing.