The costs of manufactured goods can be broken down into fixed costs and marginal (or per-unit) costs. Fixed costs include things like designing the good and setting up the factory. Marginal costs include the price of raw materials and the energy and labor costs associated with running the factory. When a factory produces 10,000 goods to serve a niche market, the cost of the final product is dominated by fixed up-front costs. If the same factory instead cranks out 10 million copies, the fixed costs are amortized and the final cost plummets.
