The production possibilities frontier (PPF), or curve, is a graphical representation of the:

• A. maximum combinations of two goods that can be produced with available resources and technology
• B. relationship between price and quantity demanded for a good
• C. minimum cost required to produce a given quantity of goods
• D. total profit earned by a firm in a perfectly competitive market

Answer: (A)

Verified step by step guidance

1. Understand that the Production Possibilities Frontier (PPF) is a fundamental concept in microeconomics used to illustrate trade-offs and opportunity costs when producing two goods.
2. Recognize that the PPF shows the maximum possible output combinations of two goods that an economy can produce given fixed resources and technology.
3. Recall that points on the PPF curve represent efficient production levels, where resources are fully utilized, while points inside the curve indicate inefficiency, and points outside are unattainable with current resources.
4. Note that the PPF does not represent relationships involving prices, costs, or profits directly; instead, it focuses on production capacity and opportunity costs.
5. Conclude that the correct interpretation of the PPF is the maximum combinations of two goods that can be produced with available resources and technology.