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Answer to Question #52368 in Macroeconomics for Abdulla Sodhiq

Question #52368
Two large international holiday companies have been planning to build hotel and leisure facilities
for tourist 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 tourist coming to country A.
a) State 2 possible opportunity cost to the island of decision in favor of the hotel developments

b) Using the concepts of scarce resources and the opportunity cost, discuss whether increased
tourism may be the best use of the island resources in the long term.
Expert's answer
a) If two large international holiday companies have been planning to build hotel and leisure facilities
for tourist on one of the island’s beaches, which is also a popular day-trip destination for local
families, then first possible opportunity cost to the island of decision in favor of the hotel developments is the loss of local families, who may not come there and the second may be the damage to ecology during the building hotels.
b) As not a lot of people know about this island and only local families come there, then the increased
tourism may be the best use of the island resources in the long term, because it may let a lot of new tourists come there to have a rest, which may give a lot of profits for the country A.

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