Given the notation (h∘k)(x) = h(k(x)), which statement correctly names the inside and outside functions and explains the order of application?

You can choose either as inside or outside depending on which function is simpler to evaluate first; both interpretations are equivalent in every context

k is the inside function applied first to x; h is the outside function applied to the result k(x)

The notation does not tell which function is inside or outside; you must inspect the algebraic expressions to determine order, so the labels inside/outside are not defined by the notation itself

h is the inside function applied first to x; k is the outside function applied afterward to the result of h(x)