The Kindle Fire is generally thought of as a mid range smartphone.

Comparing to other mid range smartphones:

- Moto E is $150: http://observationdeck.io9.com/moto-e-review-1594224578

- Moto G is $196: http://www.engadget.com/products/motorola/moto/g/

- Nexus 5 was $349 but has dropped: http://www.theverge.com/products/nexus-5/7422

Amazon typically operate on low margins. The Kindle Fire is designed to sell Amazon services. A loss leader based on followup purchases ala xbox wouldn't be entirely unheard of.