Capital Investment Maximizes Future Consumer Goods Output

Steps:

• Producing more capital goods currently shifts the PPC outward in the future by increasing productive capacity.
• Evaluate each option for the relative amounts of capital versus consumer goods at the current point.
• Select the combination with the highest capital goods production, as it yields the greatest future PPC expansion.
• Confirm this allows maximum future consumer goods by forgoing current consumption.

Why B is correct:

• Option B (P and O) features the highest capital goods output on the PPC, per the law of increasing opportunity cost, enabling the largest outward shift for future consumer goods production.

Why the others are wrong:

• A: O and Q balance goods evenly, limiting capital accumulation and future growth.
• C: R and S prioritize consumer goods now, reducing capital investment and future capacity.
• D: U and V produce minimal capital, resulting in negligible PPC expansion.

Final answer: B