More competitive pricing would reduce margins. Apple has chosen to pursue high margins and high profits rather than market share. That's how it accumulated roughly $200 billion in cash.
In theory, yes, but Apple sells premium products at premium prices and many people actually like paying more.
There's inevitably a show-off element to it, but I think there's psychological research to show that people appreciate products more when they pay more for them. (But I can't find any evidence from a quick google....)
