Which statement best describes what the PPC shows?

Which statement best describes what the PPC shows?

• A. A line representing the relationship between price and quantity
• B. The maximum feasible combinations of two goods produced with fixed resources
• C. The unemployment rate over time
• D. The minimum possible combinations of two goods with fixed resources

Answer: (B)

With fixed resources and technology, producing more of one good requires giving up some of the other. The production possibilities curve shows the boundary of what is possible—the maximum combinations of two goods that the economy can produce. Points on the curve are efficient uses of resources; points inside indicate underused resources, and points outside are unattainable with current resources. So describing the PPC as the maximum feasible combinations of two goods produced with fixed resources is the best fit.

With fixed resources and technology, producing more of one good requires giving up some of the other. The production possibilities curve shows the boundary of what is possible—the maximum combinations of two goods that the economy can produce. Points on the curve are efficient uses of resources; points inside indicate underused resources, and points outside are unattainable with current resources. So describing the PPC as the maximum feasible combinations of two goods produced with fixed resources is the best fit.