Steve Jobs was receptive to the idea of a 7-inch iPad

One particular email used in the Apple versus Samsung trial revealed that co-founder Steve Jobs was not totally against the idea of building a 7-inch iPad tablet. The said email came from Eddie Cue, Senior Vice President of Internet Software and Services at Apple. Cue, after getting his hands on a 7-inch Samsung Galaxy Tab, sent an email to Apple CEO Tim Cook, iOS software chief Scott Forstall, and marketing chief Phil Schiller in January this year. In the email, Cue felt compelled that there is a market for a 7-inch iPad.
He also wrote that he previously expressed the idea to Steve Jobs several times since Thanksgiving.

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