They definitely do with the Japanese version which is local region locked and subsidized (this is the only one you can get off the shelves, the english global version is online store exclusive and more expensive, matching the global price)

Not sure, but the installed base grows and so does the walled garden :) Nintendo always held the line on console prices, was my impression as opposed to Sega/Sony/PS. "Outdated" components and in-house circuitry, besides the ancient Tegra on the S1. I am spitballing from memory, someone else here might provide real insight. Regardless though, they require Mario Kart running on their HW, not a PC. Their margin is their decision.

There is also a very juicy accessory ecosystem. A Pro Controller is $90 these days. I've tried clones, but Nintendo paywalls a few things, like powering up from the controller.