Private Cost
Plain definition
Private cost is the cost of an economic activity borne directly by the producer or decision-maker — the costs shown in their own accounts.
In economics
Firms base output decisions on marginal private cost, not marginal social cost, which is why negative externalities cause overproduction. The gap between private and social cost is the external cost imposed on third parties.
Example
For a steel mill, the private cost of a ton of steel is its wages, materials, and energy bills — not the health damage from its smoke, which is an external cost.
Common confusion
Private cost does not include all costs the firm might eventually pay through lawsuits or reputation; those only count once actually borne — otherwise they are external costs.