Why does Zebra shrink the page?

I have been trying to use the ZD500 with LinkOS to develop and iOS for sort of label printing. Couple of things I was hoping someone can shed some light on

1) I see the printer keeps shrinking my input PDF. To print on a 4" wide x 3" high label roll, I need to provide a US Letter size page which the printer shrinks to the 4x3 size. When I provide a 4x3 pdf, the output is a stamp size print on my 4x3 paper. Why does that happen? If there a piece of code doing that I can remove? Some printer config I can change?

 

2) My ZD500 comes with a auto-cutter. Currently I believe it chops off the the label based on a small gap between 2 consecutive labels. But I want to be able to use a simple continuous label and be able to cut the label based on code, or at least based on some printer configuration. Is that possible?