A unit tax is a tax that the government imposes  ________.

Per unit Sale of output

The correct answer is Option 2: Per unit Sale of output

A unit tax is a tax that the government imposes per unit sale of output. For example, suppose that the unit tax imposed by the government is Rs 2. Then, if the firm produces and sells 10 units of the good, the total tax that the firm must pay to the government is 10 × Rs 2 = Rs 20.