The following three conditions must hold if a profit maximizing firm produces positive level of output (say equilibrium output Q*) in a competitive market:
(i) MR must be equal to MC at Q*.
(ii) MC should be upward sloping or rising at Q*.
(iii) In short run - Price must be greater than or equal to AVC. i.e.P ≥ AVC at Q*.
In long run - Price must be greater than or equal to LAC.
