alleryThe decision of whether cotton cloth should be made on handlooms or on automatic looms primarily relates to which basic economic problem?
AFor whom to produce
BWhat to produce
CHow to produce
DHow much to save
Answer & Solution
Correct answer: C. How to produce
1. The choice is between labour-intensive and capital-intensive techniques.
2. Selecting the method or technique of production is the 'how to produce' question.
3. Therefore the decision belongs to 'how to produce'.
4. It is not about which good to make or who receives it, ruling out the other questions.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 1 Unit II "Basic Problems of an Economy and Role of Price Mechanism", p.1_
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