Final answer:
In AUTO mode, the ATC/TCAS panel's transponder automatically responds to radar signals and interfaces with TCAS for collision avoidance, adjusting its reporting rate as needed.
Step-by-step explanation:
When the ATC/TCAS (Air Traffic Control/Traffic Collision Avoidance System) panel is set to AUTO, the transponder operates by automatically responding to interrogation signals from ground-based radar systems with the appropriate transponder code. In this mode, it also interfaces with the aircraft's TCAS to issue resolution advisories if there is a potential conflict with another aircraft.
The transponder's level of automation ensures that it can adjust its reporting rate depending on the radar environment, traffic density, and other factors.