Answer to Question #45150 in Economics of Enterprise for roger

Question

Two large international holiday companies have been planning to build hotel and leisure facilities for tourists on one of the island’s beaches, which is also a popular day-trip destination for local families. The government tourism minister is keen to encourage these new developments in order to ‘make best use of our resources’ . He also believes that if the hotel companies take their money elsewhere, this could lead to a loss of tourists coming to Country Y.

Q1.Explain what is meant by ‘our resources’ in this instance.

Q2.Explain the minister’s view that more hotels will ‘make best use of our resources’ .

Q3. Using the concept of scarce resources and opportunity cost, evaluate whether increased tourism may be the best use of the island’s resources in the long term.