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In addition to employment by firms or government, individuals may also work for themselves. This form of economic activity, known as self-employment, represents a case where the individual is the owner and operator of their own business, rather than an employee working under the direction of others.

Self-Employment as an Economic Activity

An economist is studying different forms of labor. Which of the following individuals best exemplifies the core concept of self-employment, where the individual is both the owner and operator of their own business?

Based on the provided descriptions, which individual is engaged in self-employment? Explain your reasoning by contrasting their work arrangement with the other two individuals, focusing on the key characteristics that define this type of economic activity.

Analyzing Work Arrangements

Consider two individuals: Person A is a freelance graphic designer who finds their own clients, sets their own project fees, and decides their own work hours. Person B is a graphic designer who works for a large advertising agency, receives a monthly salary, and reports to a creative director. Based on the concept of an individual being the owner and operator of their own business, explain the fundamental difference in the employment relationship for Person A compared to Person B.

Distinguishing Employment Relationships

Match each characteristic of a work arrangement to the type of economic activity it best describes.

An individual who is the sole owner of a small company but hires a general manager to handle all day-to-day operations and decision-making is classified as self-employed.

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