Producer’s equilibrium is the position where a producer earns maximum profits and as a result, there is no tendency to change. According to marginal cost and marginal revenue approach, there are two conditions of producer’s equilibrium :

(i) Marginal Revenue (MR) = Marginal Cost (MC)

(ii) Marginal cost must be rising i.e., MC curve must cut MR curve from below. In other words, marginal cost becomes greater than marginal revenue after this level of output. (MC > MR after the MC = MR out put level) Under perfect competition, the price charged for selling different units of the commodity is always uniform because a producer is a price taker and not a price maker. We can Wow producer’s, equilibrium under perfect, competition, as in figure. 

In the diagram, marginal revenue and marginal cost are equal to each other at two points A and E. But, the producer will be at equilibrium at E because at this level rising marginal cost is equal to marginal revenue. Producer will earn more profit at E than at A because number of units produced are maximum.