Money costs refer to the total amount of money spent in the production of goods. It is the cash payment made to the factors of production to produce a given output. Wages of the laborers, payment for raw materials and power, interest on capital borrowed tax and insurance payments by the firm and cost of depreciation etc. are paid in terms of money. These payments are money costs.
Real costs of production is a subjective concept. It is used to denote the toil, trouble, discomfort, pain, displeasure and sacrifice which the factor owners experience at the time of supplying them to the producers. Dr. Marshall laid much emphasis on the concept of real cost. The quantitative measurement of real cost is well nigh impossible.