The F-bomb

So I've definitely been in a few situations where I've been having a casual conversation with someone and they'll just say "fag" like it's no one's business, yet I can't say that I was particularly offended. I have a gay friend who doesn't fail to correct anyone who uses that word, but to me, it doesn't seem necessary. Anyway, I was just wondering what you all do when people say "fag/got" around you. Is there any correct way to handle this situation?

might I add that I'm not out yet, and people wouldn't guess.

nigga please, fag is the new word in town