Chapter 6

1. In general, automobile manufacturers produce their own engines but purchase tires

from independent suppliers. Why?

2. According to Industry Week , a shoe manufacturer recently had a production run that

resulted in 100,000 pairs of defective shoes. Workers on the production line knew

shoes were defective as they were being produced, but did nothing to fix the problem.

Do you think a profit sharing plan for workers would mitigate future problems?

Explain.

3. College Retirement Equities Fund (CREF) is a pension fund that has billions of

dollars invested in the stock market. Fund participants recently voted on a proposal

that would have placed strict limits on the amount of compensation paid to CREF

executives. Why do you think 75 percent of the participants voted against the

proposal?

4. Art-R-Us makes hand painted art reproductions. The owner-manager wishes to hire

another artist, and is considering paying a fixed wage plus either (1) a share of the

profits from each painting sold or (2) a fixed payment for each piece produced.

Which plan would you choose if you were the owner? Explain.