In general terms, efficiency refers to the extent to which effort or resources are well used for their intended task or purpose. However, there are number of different types of efficiency that help to determine how well an economy is functioning. The most efficient allocation of resources necessarily implies that all resources in the economy are used in the production of goods and services such that the best outcome is achieved for the economy (see allocative efficiency). This will often involve the greatest value of goods and services that can be produced, therefore boosting consumer satisfaction and material living standards. However, it might also involve sacrificing the production of some goods and services to safeguard or promote non-material living standards, such as the quality of the environment, leisure time, etc.
What is considered the best (or most efficient) outcome will depend on who you ask and is therefore not easily defined. Suffice to say that any well intentioned government will seek to balance all competing interests and develop policies that not only address the misallocation of resources (or market failures) that naturally occur in market capitalist economies, but also to boost 'efficiency' levels within our markets and industries such that we are increasingly better at using our resources to produce goods and services.
By definition, the most efficient allocation of resources will be one that achieves the highest levels for all types of efficiency in the economy. These are: