The rule used by perfectly competitive firms is to choose that output level which equalizes the price with the marginal cost. Output is homogeneous across all firms. This means that goods are identical in all of their characteristics such that a consumer would find products from different firms indistinguishable. We could also say that goods from different firms are perfect substitutes for all consumers. Free entry and exit of firms in response to profits.
Positive profit sends a signal to the rest of the economy and new firms enter the industry.
As a result, in the long-run economic profit is driven to zero in the industry. All firms have the necessary info to maximize profit, to identify the positive profit and negative profit industries, etc. The case of two countries is used to simplify the model analysis. The two countries are assumed to differ only with respect to the production technology. Two Goods Two goods are produced by both countries.