Assume that two firms (1 and 2) produce products that only differ in their qualities. The firms compete by setting prices independently and simultaneously. Firm 1 has the highest quality

and Firm 2 has the lowest quality. Firms have the zero marginal costs. If the quality of Firm 1's product would decrease ceteris paribus ("all else equal") but remain higher than Firm 2's quality, then it is reasonable to predict that a) the Nash equilibrium price for Firm 1 would decrease. b) the profit of Firm 2 would increase. c) the profits of both firms are zero. d) None of the above.