The correct answer is - alongside the coastline.
Under the term Northern Europe, we usually refer to the Scandinavian countries and Finland. All of the countries in this region are very cold, and the most suitable parts of them for human settlements and development are alongside the coastline. This is due to the influence of the Gulf Current that is warming up the coastal parts, sot he climate is better compared to the interior parts.
So Denmark has its population all over the country, but that is because it is relatively small and all of it is influenced by the sea, Norway's population is alongside the western coast and southern part, Sweden's and Finland's populations are in general on their southern coasts, and Iceland's population is in general in its capital which is on the coast.