I appreciate your taking the time to comment.

A TL;DR of more than 300 words seems rather long to me.

True. I could try compactifying it more when I have time.

Also, for #1, did you mean to say "The industries that rely on knowledge goods tend to have long-run downward-sloping supply curves."?

Thanks! I fixed that.

Smart phones with less than 32 GB are still a significant part of the market. Wouldn't technology that allows cheaper 32 GB USB flash drives also allow 32 GB smart phones? Also, doesn't this intersect with SSD? I think that a lot of people would be willing to pay $100 for a 1 TB SSD.

I'd need to know more about the technological limitations to comment. Prima facie, I don't think that the cost of the flash memory is the constraint (32 GB flash drives cost ~$20 or less, and the NAND flash itself costs < $15). I'm not sure what the limiting factor is. It could be an issue of miniaturization (32 GB takes more space inside the phone so needs a more difficult manufacturing process). Or it could be a form of price discrimination by the manufacturers (though the competitive nature of the smartphone device market is an argument against price discrimination being viable in the long term).

Also, doesn't this intersect with SSD? I think that a lot of people would be willing to pay $100 for a 1 TB SSD.

That's possible. I don't have deep object level knowledge here. Whether the innovation will happen depends on whether the number of people who would initially (i.e., over the time horizon that companies need to justify investments) be willing to buy a 1TB SSD at that price is enough to recoup the initial research and investment costs needed for getting the price down to that level.