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How much will a 10-day trip to Iceland cost?

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I posted a message earlier this week about my trip to Iceland this summer. I got a lot of helpful information about what to do in Iceland, but not very much on prices. (Although, I do now know that eating out is very expensive.) Is everything expensive or is it just restaurants? Are grocery prices as expensive as the restaurants, or are they reasonable?
Here is the scenario:
We would like to rent a vehicle for 10 days (SUV or car, though I don't know which would be better for the terrain).
We would like to have breakfast included in our lodging (bed & breakfast), buy our lunches and some dinners at the grocery store, and then eat out at least half the evenings.
We like to hike and experience nature. We have never been on any tours, though I do not know if some of the locations in Iceland would be reasonably accessable to travels unfamiliar with the terrain. Do you recommend taking tours to the more difficult locations, or is it pretty easy to get to more remote location (like the glacier).
As far as lodging is concerned: is there a lot of lodging in Iceland? What are the average costs? I have heard a lot of travelers camp outside. Is that true, and is that recommended given the temperatures in June and the local animal life?

I know this is a lot of information to ask, but any information would be helpful as I try to plan my budget.

Thank you in advance for your advice.

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