What does a production possibilities curve illustrate?

The production possibilities curve (PPC) is a graphical representation that illustrates the various combinations of two goods that an economy can produce, given fixed resources and technology. The shape of the curve typically demonstrates the trade-offs in production; as more of one good is produced, increasing amounts of the other good must be sacrificed due to the resources being limited. This concept highlights the opportunity cost associated with reallocating resources towards the production of one good over another.

By visualizing these trade-offs, the PPC enables economists and decision-makers to understand the potential output of an economy and emphasizes the importance of efficient resource allocation. It can also illustrate scenarios of efficiency (points on the curve), inefficiency (points inside the curve), and unattainability with current resources (points outside the curve). Overall, option B correctly captures the fundamental purpose of the production possibilities curve in economics.