Question: A film director has signed a contract in which the production studio promises to pay her $1,000,000 plus 5 percent of the studios rental revenues

A film director has signed a contract in which the production studio promises to pay her $1,000,000 plus 5 percent of the studio’s rental revenues from the film, all of whose costs of production and distribution are fixed. True or false: If both the director and the studio care only about their own financial return from the project, then the director will prefer a lower film rental price than will the studio.

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