Suppose that there are 10 million workers in Belgium, and that each of these workers can produce either 2 cars or 30 tonnes of wheat in a year.

a. What is the opportunity cost of producing a car in Belgium? What is the opportunity cost of producing a tonne of wheat in Belgium? Explain the relationship between the opportunity costs of the two goods.

b. Draw Belgium’s production possibilities frontier. If Belgium chooses to consume 10 million cars, how much wheat can it consume without trade? Label this point on the production possibilities frontier.

c. Now suppose that the United Kingdom offers to buy 10 million cars from Belgium in exchange for 20 tonnes of wheat per car. If Belgium continues to consume 10 million cars, how much wheat does this deal allow Belgium to consume? Label this point on your diagram. Should Belgium accept the deal?