1. That you're making a really good game with a compelling core gameplay loop that keeps people coming back because of how enjoyable it is to play, and which has few if any awkward barriers in the UX department. That's fine, and I'd say it's perfectly ethical.
2. On the other hand, if you're making a manipulative, pay to win, lootbox and microtransaction stuffed piece of crap (like many mobile games) and its only optimised for engagement in the sense its trying to pressure users to keep playing, then no, that probably wouldn't be ethical.
So it depends really. A well designed, usable system that people want to keep using because of how much easier it makes their life/how much more fun it is to play around with is fine, but one which tries to manipulate them with dark patterns and psychological tricks is not.