Questions: A production possibilities curve illustrates: scarcity. consumer preferences. market prices. the distribution of income.

The answer is the first one: scarcity.

Explanation for each option:

1. Scarcity: The production possibilities curve (PPC) illustrates the concept of scarcity by showing the maximum possible output combinations of two goods or services that an economy can achieve when all resources are fully and efficiently utilized. It highlights the trade-offs and opportunity costs associated with allocating resources between different goods, thereby demonstrating the limitations imposed by scarce resources.

2. Consumer preferences: The PPC does not directly illustrate consumer preferences. While consumer preferences can influence the allocation of resources and the points on the curve where production might occur, the curve itself is a representation of production capabilities, not preferences.

3. Market prices: The PPC does not show market prices. It is a graphical representation of the maximum output possibilities for two goods, given a set of inputs and technology. Market prices are determined by supply and demand in the market, which is not depicted by the PPC.

4. The distribution of income: The PPC does not illustrate the distribution of income. It focuses on the production capacity and trade-offs between two goods, rather than how income is distributed among individuals or groups within the economy.

Summary: The production possibilities curve illustrates scarcity by showing the trade-offs and opportunity costs associated with the allocation of limited resources between different goods.