Production Possibility Curve Reveals Opportunity Costs

Steps:

• Identify the PPC as a curve showing maximum combinations of two goods (e.g., manufactured and agricultural) with fixed resources.
• Note that points on the curve represent efficient production; the slope indicates trade-offs.
• Calculate opportunity cost as the amount of one good sacrificed to produce more of the other, given by the curve's slope.
• For manufactured goods, the slope quantifies agricultural products forgone per unit increase.

Why C is correct:

• The PPC's slope directly measures opportunity cost, defined as the ratio of goods traded off along the curve (e.g., Δ agricultural / Δ manufactured).

Why the others are wrong:

• A: PPC shows feasible outputs, not consumer preferences, which depend on utility and prices.
• B: Economic growth shifts the PPC outward; the diagram shows current potential, not growth.
• D: Consumption preferences involve intertemporal choices like saving rates, unrelated to a static PPC.

Final answer: C