Final answer:
Market equilibrium maximizes total economic surplus by efficiently allocating resources where demand and supply are balanced, resulting in the optimal utilization of scarce resources and maximizing consumer surplus, producer surplus, and social surplus.
Step-by-step explanation:
The question is asking about market equilibrium and its efficiency in terms of economic surplus. Market equilibrium refers to a situation where demand and supply are balanced, and there is no tendency for change. At this point, the economy is operating efficiently, meaning that it maximizes total economic surplus.
The concept of economic surplus can be broken down into consumer surplus, producer surplus, and social surplus. Consumer surplus occurs when consumers are willing to pay more for a product than the market price, indicating they derive additional benefit. Producer surplus is the benefit producers receive when they sell a product for more than the lowest price they would be willing to accept. Social surplus, which is the sum of consumer surplus and producer surplus, is maximized under market equilibrium, as there are no unexploited opportunities for trade that could make someone better off without making someone else worse off.