Private Cost of Production:

Private costs relate to all costs incurred by the firm in the course of production. They include payments firms make for hiring or purchasing factors of production as well as cost of resources owned and used by the firms. In determining private costs of production, it is essential to consider both explicit and implicit costs incurred.

Explicit Costs

Explicit costs are payments made by the firm when it purchases or hires factors of production for the production of goods and services. They are also referred to as historical costs. They may include rents on land, wages and salaries of labour, interest or dividend earnings on capital and producer's normal profit.