Which of the following outcomes is achieved when the factors of production are allocated efficiently in an economy?

• A. All individuals receive equal shares of income and wealth
• B. Resources are used to produce the combination of goods and services most valued by society
• C. Firms maximize profits by ignoring consumer preferences
• D. The government sets prices for all goods and services

Answer: (B)

Verified step by step guidance

1. Understand the concept of efficient allocation of factors of production: It means that resources (land, labor, capital, and entrepreneurship) are used in a way that maximizes the overall benefit to society.
2. Recall that efficiency in microeconomics often refers to Pareto efficiency, where no one can be made better off without making someone else worse off, and productive efficiency, where goods are produced at the lowest possible cost.
3. Analyze each option in the context of efficiency: Equal income distribution is about equity, not efficiency; firms ignoring consumer preferences would not meet demand effectively; government setting all prices may lead to inefficiencies due to lack of market signals.
4. Identify that the efficient allocation outcome is when resources produce the combination of goods and services most valued by society, reflecting consumer preferences and maximizing societal welfare.
5. Conclude that efficient allocation aligns production with consumer demand, ensuring that scarce resources generate the highest possible satisfaction or value.