What does the Production Possibility Curve (PPC) illustrate?

The Production Possibility Curve (PPC) illustrates the maximum combination of any two goods that an economy could produce, given its available resources and technology. This curve provides a visual representation of trade-offs and opportunity cost, as it shows how increasing the production of one good typically requires reducing the production of another due to limited resources.

The PPC is often concave to the origin, indicating that the opportunity cost of producing one good increases as more of that good is produced. Points along the curve represent efficient production levels, while points inside the curve signify underutilized resources, and points outside the curve are unattainable with the current resource constraints.

This concept is crucial for understanding economic efficiency and the limitations faced by economies in resource allocation. The other options do not capture the essence of what the PPC conveys, making the second choice the best representation.