estimations are done using ARDL-BOUNDS library for EViews written by Mehmet Balcilar from Eastern Mediterranean University. We would like to thank him for sharing this library with us. We would like to thank two anonymous referees for their valuable comments and suggestions. Finally, we also would like to thank the co-editor Germán Coloma for his invaluable support.

The purpose of this study is to explain the following proposition: Profit maximization objective is only an assumption, which is valid only when marginal cost is zero; a firm should maximize its total sales rather than its profit when marginal cost is not equal to zero. Using simple logical consequences, the study shows the following: (i) Cournot equilibrium occurs at total revenue maximization conditions rather than profit maximization conditions, even if costs are not neglected; (ii) if average costs of plants are not equal to each other, a multiple-plant monopoly cannot maximize its profit; it should maximize its total revenue, even if costs are not zero; (iii) a firm's goal should be total revenue maximization rather than profit maximization, when marginal cost is not equal to zero; (iv) profit maximization behaviour does not have to explain economic growth; however, total sales maximization behaviour clearly explains economic growth and (v) total sales maximization objective, at the producer's equilibrium conditions, guarantees stability under diminishing returns. The study concludes with nine simple results in order to support its claim. The results of the study emphasize that (i) an empirical analysis based on a strict theory should start to the analysis depending on a goal function which maximizes total sales rather than profit and (ii) a representative social planner who designs a growing economy, which grows thanks to total sales maximization behaviour of firms, should design the economy where price changes do not give advantage to the firms.

The purpose of this paper is to examine the sensitivity of the Turkish economy’s natural rate of growth to the actual rate of growth, covering the period 1980-2008. To determine the reason why the natural rate of growth is endogenous, the long-run and the causality relationships between real gross domestic product and each of the production factors (labour force and physical capital stock) are investigated with the bounds test. The natural rate of growth for the Turkish economy is found to be at 4.97 percent and the actual rate of growth in boom periods is approximately 35.6 percent; indicating endogeneity. However, according to the causality test results, the endogeneity of the natural rate of growth may be attributed to the total factor productivity rather than the labour force and physical capital stock. This result is important and the debate on this subject may lead to further studies

Economic growth occurs when an economy's production at the full employment level increases. Increase in the production at the full employment level is shown by an outward shift of production possibility frontier (PPF). The aim of this study is to measure capacity growth of an economy by utilizing equation of the PPF. The present study takes into account a bowed-out (concave to the origin) PPF in order to measure economic growth. Thus, at first, concavity conditions are obtained. Besides, the study augments Cobb-Douglas production function by assuming the nature of technological progress as Harrod neutral. For this reason, concavity conditions are obtained assuming Harrod neutrality. The first result of the article documents that there are conditions in order to guarantee positive economic growth. The second result indicates that growth of productive capacity depends on (i) rate of growth of labour, (ii) rate of growth of level of technology (rate of growth of the labour productivity) and (iii) elasticity parameters, under specific conditions. Based on these results, our study formally proves that the long-term or natural or potential rate of growth is determined by rate of growth of effective labour.

This paper analyses the short-and long-term relationships between the transportationcommunication capital and the output for Turkey. The study applies a Cobb-Douglas production function under the assumption of constant returns to scale and employs co-integration analysis by estimating a vector error correction model (VECM). As a result of the VECM estimation, one co-integrating relationship is detected. The results based on the impulse response function analysis imply that per labour transportation-communication capital appears both to have been a crucial input in the Turkish productive process and to have had a positive crowding in effect on the per labour non-residential total capital formation. Moreover, the results support the argument that the transportation-communication capital has a lagged impact on economic growth. The long-term accumulated elasticity of output to transportation-communication capital has been found to be 0.59. The long-term accumulated marginal product was also calculated. It implies that a 1 Turkish Lira increase in per labour transportation-communication capital results in a long-term rise of 1.45 Turkish Liras in per labour output. All these findings suggest that transportation-communication capital may be a powerful tool for policy-makers to promote long-term per labour real output growth in Turkey.