In real life setting, explain the main concept of the standard theory of trade.
The Standard Model, like the classical theories of international trade, assumes that the world economy is represented by two countries, each of which produces two goods: X and Y. In addition, the standard model uses the following assumptions: in the process of consumption, buyers seek to provide maximum effect (graphically depicted using indifference curves), and manufacturers seek to maximize profits; in the domestic and world markets there is perfect competition, in which the equilibrium price is set at a level corresponding to the marginal costs of production.
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