An efficient allocation is one that:

• A. guarantees that all goods are produced at the lowest possible price
• B. maximizes total surplus in the market
• C. ensures that every individual receives an equal share of resources
• D. minimizes the cost of production for all firms

Answer: (B)

Verified step by step guidance

1. Understand the concept of efficiency in microeconomics, which typically refers to an allocation where resources are used in a way that maximizes the overall benefit to society.
2. Recall that total surplus is the sum of consumer surplus and producer surplus, representing the net benefit to all participants in the market.
3. Recognize that an efficient allocation maximizes total surplus, meaning no one can be made better off without making someone else worse off (Pareto efficiency).
4. Evaluate the given options by comparing them to the definition of efficiency: producing goods at the lowest price, equal shares, minimizing costs, and maximizing total surplus.
5. Conclude that the option 'maximizes total surplus in the market' aligns with the economic definition of an efficient allocation.