Which of the following is an economic challenge that governments must face when aiming to maximize economic surplus and efficiency?

• A. Preventing any form of market exchange
• B. Allocating resources efficiently to maximize total surplus
• C. Ensuring that all goods are provided free of charge
• D. Eliminating all forms of consumer and producer surplus

Answer: (B)

Verified step by step guidance

1. Understand the concept of economic surplus, which is the sum of consumer surplus and producer surplus, representing the total benefit to society from market transactions.
2. Recognize that maximizing economic surplus involves allocating resources in a way that maximizes total gains from trade, meaning goods and services go to those who value them most and are produced at the lowest cost.
3. Identify that governments face the challenge of efficient resource allocation because resources are scarce and must be distributed to maximize total surplus without unnecessary waste or market failures.
4. Evaluate the options given: preventing market exchange, providing all goods free of charge, and eliminating all surplus are not practical or efficient goals; instead, the key challenge is to allocate resources efficiently to maximize total surplus.
5. Conclude that the economic challenge for governments is to design policies and institutions that promote efficient allocation of resources, thereby maximizing total economic surplus and overall efficiency.