Using Figure 4-3, explain why a pollution abatement program that reduces discharge beyond Q1 is inefficient. Consider the following two projects. Both have costs of $5,000 in Year 1. Project 1...

Using Figure 4-3, explain why a pollution abatement program that reduces discharge beyond Q1 is inefficient.

Consider the following two projects. Both have costs of

$5,000 in Year 1. Project 1 provides benefits of $2,000 in each

of the first four years only. The second provides benefits of

$2,000 for each of Years 6 to 10 only. Compute the net benefits using a discount rate of 6 percent. Repeat using a discount

rate of 12 percent. What can you conclude from this exercise?