In pair production, a photon is converted into an electron and a positron. The rest mass of the electron is approximately . So, in order to create two electrons, the photon must have at least of energy. Thus, curve 2 shows the cross-section for pair production. The best way to distinguish between the photoelectric effect and the Compton effect cross-sections is to notice the zig-zag in the upper left-hand part of curve 1. In the photo-electric effect, a photon gives up all of its energy to an electron. The zig-zag corresponds to what is known as an absorption edge.
When the photon energy passes the binding energy of some electron in the lead atom, the cross-section increases rapidly because now the photon can transfer its energy to the electron, while before it could not. Therefore, answer (B) is correct.