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Economics: Theory of Rent (Part 2)

GENERALLY SPEAKING, commodities sell at their price of production. This is calculated by the amount of the total capital involved in their production - constant capital (machinery, materials, etc.); variable capital (wages); plus a profit. Through the action of competing capitals an average rate of profit is formed, and all capitals, usefully employed,whatever the field of investment, will generally obtain the average.

 This means that the range of goods produced by these capitals will sell at average prices appropriate to their classification as use-values. For instance, similar-quality bread produced by one baker would not alter dramatically in price from that of another baker, although their individual prices of production may be different. The amount of profit is the difference between the cost of production and the average price of production, which is not determined by individual prices, but by a socially determined price based on socially necessary labour which r…