A unit tax is best described as:

• A. A fixed tax as a percentage of price
• B. A fixed amount per unit sold or per weight
• C. A tax on wealth
• D. A tax on final consumption only

Answer: (B)

A unit tax means a fixed amount charged for each unit of a good sold or produced, such as $1 per bottle or $0.50 per litre. The tax does not depend on the price of the good, so it remains the same whether the price is high or low. This differentiates it from a tax that is a percentage of price, which would vary with the good’s price. It is not a tax on wealth, and while it can affect consumption, it is not defined as a tax only on final consumption. In market terms, the per-unit tax raises marginal cost by that fixed amount, shifting the supply curve upward and typically increasing the price to buyers while reducing the quantity traded.