Answer: B. Modified Knife
For the same reason you'd choose a jig saw to cut a circle, you'd choose the Modified Knife to carve the letter "S" because there isn't as much metal on the spine. A narrow blade means you're dragging less metal around the curve, just like a jig saw.
And conversely, if you are chip carving straight lines and three corner chips, you'd want a knife with more metal in the wood (think circular saw). The Cutting Knife will hold a straight cut better than the Modified Knife.