A production possibilities curve (PPC) illustrates the attainable combinations of:

• A. the maximum profit a firm can earn in a competitive market
• B. two goods that an economy can produce using all available resources efficiently
• C. the combinations of goods that consumers prefer to purchase
• D. the allocation of resources between labor and capital in a single industry

Answer: (B)

Verified step by step guidance

1. Understand that a Production Possibilities Curve (PPC) represents the maximum possible output combinations of two goods or services that an economy can produce given fixed resources and technology.
2. Recognize that the PPC assumes all resources are used efficiently, meaning the economy is operating at full capacity without any waste.
3. Note that the PPC does not directly show profit, consumer preferences, or resource allocation within a single industry, but rather the trade-offs between producing different goods.
4. Recall that points on the curve represent efficient production levels, points inside the curve indicate underutilization of resources, and points outside the curve are unattainable with current resources.
5. Conclude that the PPC illustrates the trade-offs and opportunity costs involved in allocating resources between two different goods in an economy.