This extension will not only let you specify the quality of the videos, but will also consider FPS!
This means, for example - if your computer can handle 1080p videos at 30 FPS, but not at 60 FPS - you can automatically set 60 FPS videos to play at 720p!
And the best part - it works for embedded YouTube videos as well! (I.e. YouTube videos that aren't in YouTube.com)
It can even automatically resize videos according to your preference!