Economic efficiency calls for the optimal allocation and utilization of resources to maximize societal well-being. It entails attaining Pareto efficiency, where no one can be improved without worsening someone else’s situation, as well as productive and allocative efficiency, involving producing the highest output with given resources and distributing them to satisfy consumer preferences. Market imperfections, like monopolies or externalities, can hinder efficiency, leading to government interventions to establish property rights, promote competition, and address failures through taxation and regulation.
