I, too, was once naive and thought that the price of goods is largely determined by the cost of production.

But as anyone who has taken Econ 101 knows, the price is based on what people are willing to pay for it. The cost of production merely dictates whether it is viable to sell in the market.

If most people are willing to pay $10 for an ebook, when the hardcopy is also $10, then $10 is what they'll sell it for.