Which of the following best describes the virtue of efficiency in economics?

• A. Resources are allocated in a way that maximizes total surplus in society.
• B. Goods and services are distributed equally among all members of society.
• C. The government sets prices to ensure everyone can afford basic goods.
• D. Firms produce goods at the lowest possible cost, regardless of consumer preferences.

Answer: (A)

Verified step by step guidance

1. Understand that in economics, efficiency refers to how well resources are allocated to maximize the overall benefit to society.
2. Recall that total surplus is the sum of consumer surplus and producer surplus, representing the net benefits to all participants in the market.
3. Recognize that efficiency is achieved when resources are allocated in a way that maximizes this total surplus, meaning no one can be made better off without making someone else worse off (Pareto efficiency).
4. Compare the given options to this definition: equal distribution, government price setting, and lowest cost production do not necessarily maximize total surplus.
5. Conclude that the option stating 'Resources are allocated in a way that maximizes total surplus in society' best captures the economic virtue of efficiency.