5. b. Let the marginal savings from pollution generation be given by MS and marginal damages be given by MD. The regulator incorrectly estimates the marginal damage function. The estimated marginal damage function MD is less than the true marginal damage function, i.e., MD < MD. To control emissions, the regulator can set an emission fee or an emissions target. Evaluate whether the following statement is (i) true, (ii) false or (iii) uncertain. "Emission fees and emissions target will produce the same amount of deadweight loss"

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