Final answer:
A Production Possibilities Curve (PPC) reflects the trade-offs between two goods as an economy reallocates resources due to the law of increasing opportunity costs and comparative advantage, leading to a concave shape.
Step-by-step explanation:
A Production Possibilities Curve (PPC) represents the different combinations of two goods or services an economy can produce with a fixed amount of resources and technology. The curve is usually drawn as a concave curve rather than a straight line due to the law of increasing opportunity costs, which states that as production of one good increases, the opportunity cost of producing an additional unit of the other good generally increases. This is because resources are not equally efficient in producing all goods, so when more resources are reallocated to produce more of one good, less efficient resources are transferred, resulting in fewer units of the other good being produced.
The core reason the PPC is typically a curve is the concept of comparative advantage. When production is optimized based on comparative advantage, it leads to a smooth, nonlinear curve, reflecting the trade-offs and efficiency gains from focusing on producing goods where an economy has a lower opportunity cost.