In an externality graph representing pollution, what does the area between the marginal private cost and marginal social cost curves represent?

In an externality graph that shows pollution, the area between the marginal private cost curve and the marginal social cost curve represents the cost of the negative effects of pollution that are not reflected in the market price. The marginal private cost is what producers consider when making decisions, while the marginal social cost includes the additional costs to society, like health issues and environmental damage. This area shows the difference between what the producer pays and what society ultimately bears due to pollution. For example, if a factory pollutes a river, the factory might only pay for its production costs, but the community suffers from health problems and decreased water quality. Understanding this area helps us see why regulation or taxes might be needed to reduce pollution and make the costs more balanced.