According to the MR-MC approach, the firm (or producer) attains its equilibrium, where the following two necessary and sufficient conditions are fulfilled.
1. MR = MC
2. MC must be rising after the equilibrium level of output
Thus from the table, we can say that the firm is in equilibrium at output equal to 4 units. When output is 4 units, MR= MC (thus, the first condition is satisfied) and MC increases after the 4th unit of output (therefore, the second condition is satisfied).
At output less than 4 units, if the firm produces slightly lesser level of output than 4 units, then the firm is facing price that exceeds the MC. This implies that higher profits can be achieved by increasing the level of output to 4 units. On the other hand, if the firm produces slightly higher level of output than 4 units, then the firm's MC exceeds its MR, thereby making profits negative. This implies that higher profits can be achieved by reducing the output level to 4 units. Thus, point E is the producer's equilibrium and 4 units of output is the profit maximising output level, where Price = MC and also MC is rising.