Swedish and Danish workers can each produce 4 capital goods a year. A Swedish worker can produce 10 tonnes of grain a year, whereas a Danish worker can produc 5 tonnes of grain a year. To keep things simple, assume that each country ha 100 million workers.

a. For this situation, construct a table analogous to Table 19.1.

b. Graph the production possibilities frontier of the Swedish and Danish economies.

c. For Sweden, what is the opportunity cost of a car?

Of grain? For Denmark, what is the opportunity cost of a car? Of grain? Put this information in a table analogous to Table 19.3.

d. Which country has an absolute advantage in producing capital goods? In producing grain?

e. Which country has a comparative advantage in producing capital goods? In producing grain?

f. Without trade, half of each country’s workers produce capital goods and half produce grain. What quantities of capital goods and grain does each country produce?

g. Starting from a position without trade, give an example in which trade makes each country better off.