Final answer:
Production Possibilities Curves (D) are used to determine if a country has an absolute or comparative advantage in an economic model. Absolute advantage refers to the ability to produce more efficiently, while comparative advantage is about producing at a lower opportunity cost. Both concepts are foundational to understanding potential gains from trade, even when one country is more productive overall.
Step-by-step explanation:
To determine whether each country has an absolute advantage or comparative advantage in an economic model showing the relationship between two nations, one would look at the Production Possibilities Curves (D). These curves demonstrate the output that can be produced with a given set of resources and technology, showing the maximum number of goods that a country can produce. If a country can produce more of a good than another country using the same resources, it has an absolute advantage.
However, even if one country has an absolute advantage in all products, both countries can gain from trade if they specialize according to their comparative advantages. Comparative advantage is when a country can produce a good at a lower opportunity cost than other countries. By specializing in goods where they have a comparative advantage, countries can trade to mutual benefit.