Generally, people are most efficient when they spin the pedals at around 70-90rpm. Find your cadence first, then find a gear where you can maintain this cadence.
On a hill, that may very well be your lowest gear, but maybe not.
On the flats, your highest gear is for going fast. If this is your goal, you'll have to shift up to it so you can maintain cadence at the speeds leading up to fast.
Spinning with a higher cadence also improves cardio and saves your knees.
As for standing, generally it's used when accelerating. It does take a little more energy to stand, but mostly it's personal preference.