Technological progress and optimal supply price

This article presents an analysis of the firm’s optimal product-price decision as a joint process with optimal production planning. The production decision is formulated as a dynamic optimization problem over an infinite horizon under conditions of profit maximization and rational expectation given a set of market and technical-progress information. The problem is solved to obtain the time paths of shadow prices of capital and labor services. These shadow prices of factors are combined to construct the time path of the optimal supply price. Sensitivity analyses are conducted on the optimal supply price to isolate the variational effects of technical progress and labor turnover rate. The results are stated as propositions.