Price is determined usualy by few factors - target group (who is the audiance), reach (how large it is and how big portion of the target group you can reach), sociodemography (in general what you know about them - age, sex, salary, education etc).
Two pricing models are common CPM (cost per mile = 1000 impressions) and CPC (cost per click).
So best way how to set up starting price is compare your application reach and target group to some available pricelists. Let you try for example AdMob - www.admob.com. If your application is really specific (vertical market) price can be 100-500% higher compared to untargeted traffic.
At the end price is defined also by demand, so question is if there are advertisers, who are willing to buy this advertising space. You can make offer directly or you can cooperate with some media agency, what will offer the space instead of you and you can still work on improving your application.