There is no way Apple will hit $199, or even $249.
$299 for the cheapest version would make sense to me. It's bigger than the Nexus 7, so it warrants more than the $199 that Google is asking. Throw in a $50 premium since it's an Apple product with really strong ecosystem, and $300 will sell like hot cakes. That also provides clear pricing distinctions with the other iPads: $300 for the iPad Mini, $400 for the iPad 2, and $500 for the iPad 3.