In economics; the “how” or input question refers to?

A. The problem of allocating scarce resources among competing uses
B. The way in which factors of production may be combined to produce output
C. The way in which a firm decides on its profit maximising rate of output
D. The problem of how output is distributed among individuals and groups in society.

Correct Answer:

Option B – The way in which factors of production may be combined to produce output

Explanation

The economic question of “how to produce” refers to, which techniques are to be adopted? This question is important because the choice of technique depends on the prices of the factors of production.

That is, if labour is cheap and capital is expensive, a labour-intensive technique would be considered and vice-versa. The prices of labour and capital are determined by the demand for and supply of labour and capital respectively.