The production possibilities curve (PPC) illustrates the fundamental concept of trade-offs in economic production. Essentially, it shows the maximum possible output combinations of two goods that an economy can produce, given its resources and technology.
The principle that this curve highlights is that to produce more of one good, an economy must give up increasing amounts of another good. This represents option (a) in the question: as you allocate more resources to one good, the sacrifices made in terms of the other good become larger and larger due to the law of increasing opportunity costs.
In contrast, option (b) suggests that an economy will automatically seek a certain level of output, which is not necessarily what the PPC illustrates. The PPC is more about the limits and trade-offs faced by an economy rather than depicting a self-regulating output level.
In summary, the production possibilities curve serves as a visual representation of the trade-offs and opportunity costs that arise in production decisions. Understanding this curve is essential for grasping how resources are allocated in an economy.