The goods produced are assumed to be homogeneous across countries and firms within an industry. Labor is homogeneous within a country but may have different productivities across countries. This implies that the production technology is assumed to differ across countries.
Labor is costlessly mobile across industries within a country but is immobile across countries.
Full employment of labor is also assumed. Below you will find a more complete description of each assumption along with a mathematical formulation of the model. Perfect Competition Perfect competition in all markets means that the following conditions are assumed to hold. This implies that when choosing output to maximize profit each firm takes the price as given or exogenous. Firms choose output to maximize profit.