Twilight peeks through only a few hours in winter and daylight beams almost all night in summer in this city, whose name has a tricky spelling.

Almost two-thirds of this island nation’s residents live in the capital city area, whose reputation for nightlife is legendary — what else is there to do but party in the dark of winter? Despite the darkness, the island has a temperate winter climate moderated by the Gulf Stream.

The island’s remote location means a high cost of living for residents, many of whom work two jobs. Fishing is the main industry. Tourism is also important. Many visitors are attracted to the numerous hot springs caused by the island’s geothermal activity.

Another fascination is the island’s unique breed of horses, which are smaller than many horses, yet strong and energetic. They have been bred pure for more than 1,000 years. Touring the island by horseback is a popular option for visitors.

The sculpture pictured here stands near The Pearl, a modern hilltop architectural landmark with an observation deck offering 360-degree views of the city. The steel-and-glass-dome building was constructed atop huge storage tanks filled with geothermal water used to heat the city. A thermally heated Olympic-size swimming pool, open year-round, is one of the city’s main attractions.

Once part of Denmark, this independent republic has been hit with earthquakes and volcanic eruptions. Lava fields surround the city, where, it is said, elves live, usually in peace with the human population.

Where am I?

Send your answer to goworld@goworldpublishing.com. All readers correctly identifying this island country and city will be entered in a drawing to receive a recently published travel book.

Draka, official public transport in Black Rock City, Nevada

Answer to the October 2006

“Where in the World” Contest

Last month’s mystery destination was the Burning Man Festival, Nevada. Our photo showed Draka, the flame throwing dragon which serves as official public transport within the temporary tent community called Black Rock City, Nevada.

Thanks to all who wrote in their guesses. This month’s winner is Sanya from New York. Congratulations, Sanya!