Need help! Grad school interview question

I love to think that I am a great diplomat, so here goes!
First thing is that you need to maintain control of the situation. Bring #1 into your office (never in front of others). Ask their side of the story and stay objective. Bring in #2 and ask the same. Ask them both this question...How do you think that this problem can be resolved? Give them some control over their own conflict. Be direct in your approach and let them know you are not taking sides, but if this continues someone will be let go. This gives them a chance to solve it on their own. If they cant, you will step in and make a decision based on the good of the whole. Professionalism in the workplace must be upheld or total chaos will take over. So there it is.
Good luck!