Final answer:
Internal costs are the costs directly associated with the production of goods and services, borne by the individuals who incur them. This contrasts with social costs, which also include costs borne by third parties, such as environmental costs.
Step-by-step explanation:
Costs that are only borne by the individuals that incur those costs are known as internal costs. These costs do not include the external effects of transactions that can affect other third parties, which are known as external costs or negative externalities. Instead, internal costs are the explicit and implicit costs directly associated with the production of goods and services, such as wages paid to employees or rent paid for a facility. Social costs, by contrast, encompass both internal costs and additional costs incurred by third parties, like pollution costs. Understanding these concepts is important when discussing the economics of pollution and market prices.