Questions: According to the equation Q=20+0.8P, where Q is the quantity supplied and P is the price of the good measured in dollars, the A. quantity supplied equals 80 percent of the price. B. quantity supplied rises by 0.8 units as the price increases by 1 C. quantity supplied rises by 20 units as the price increases by 1. D. slope of the supply curve equals 20. E. quantity supplied rises by 16 units as the price increases by 1.

The answer is B: quantity supplied rises by 0.8 units as the price increases by $1.

Explanation for each option:

A. Quantity supplied equals 80 percent of the price.

• This statement is incorrect. The equation $\mathrm{Q}=20+0.8 \mathrm{P}$ indicates that the quantity supplied is not a percentage of the price. Instead, it shows that the quantity supplied is a linear function of the price, with a slope of 0.8.

B. Quantity supplied rises by 0.8 units as the price increases by $1.

• This statement is correct. The coefficient of P in the equation is 0.8, which means that for every $1 increase in price, the quantity supplied increases by 0.8 units.

C. Quantity supplied rises by 20 units as the price increases by $1.

• This statement is incorrect. The equation shows that the quantity supplied increases by 0.8 units for every $1 increase in price, not 20 units.

D. Slope of the supply curve equals 20.

• This statement is incorrect. The slope of the supply curve is represented by the coefficient of P, which is 0.8, not 20. The number 20 in the equation is the y-intercept, not the slope.

E. Quantity supplied rises by 16 units as the price increases by $1.

• This statement is incorrect. As mentioned earlier, the quantity supplied increases by 0.8 units for every $1 increase in price, not 16 units.

In summary, the correct interpretation of the equation is that the quantity supplied increases by 0.8 units for every $1 increase in price, which corresponds to option B.