Google just purchased a company called Nest for over 3 billion dollars. Their most important product is a learning thermostat which adjusts the temperature in your home to keep you comfortable while reducing energy use. It's current retail price is $249.
Let's pretend that Google's new management is hoping to maximize revenue by lowering the price and making the thermostat available to a broader audience.
Assume the following:
- The current number of people who will buy the thermostat (at $249) is one million per year.
- The number of people who will buy the thermostat goes up by 7,000 for every dollar they drop the price.
Which of the following prices would give Google the largest amount of revenue: