Suppose that two firms, A and B compete. They can choose different strategies – a combination of low price or high quality. The tables below show the best practice frontiers for each firm.

A’s Possibilities

Price …………    Quality

0 …………………….. 12

1 ……………………… 8

2 ……………………… 4

3 ……………………… 0

B’s Possibilities

Price ……………   Quality

0 ………………………. 6

2 ………………………. 4

4 ………………………. 2

6 ………………………. 0

What is the cost to A of 1 unit of high quality? What is the cost to B of 1 unit of high quality? What is the cost to A of 1 unit of price? What is the cost to B of 1 unit of price? Which firm should focus on high quality? Which on low price? Explain.