Producer equilibrium occurs at the output level where marginal cost equals marginal revenue and marginal cost is greater than marginal revenue after that point. This ensures the producer is maximizing their profits. The document discusses producer equilibrium under conditions of perfect competition, where price remains constant, and imperfect competition where price falls with increasing output. It provides examples using schedules and diagrams to illustrate how to determine the equilibrium output level that satisfies the conditions of marginal cost equaling marginal revenue and marginal cost being greater than marginal revenue after that point.