Because the production cost is much smaller percentage of the price than you think it is, Particularly for hardcover/first run books.
A decent laser printer can print a double sided text page for 5c/p. Assuming one double sided A4 is roughly equivalent to 4 pages of a book (double sided and folded in half) that means I can print a 400 page book equivalent for $5 on my own. A big publisher can do it cheaper.
The cost of a $40 hardcover doesn’t reflect the cost of printing it. It reflects the cost of a writer and editor and layout people and a whole bunch of other people spending a bunch of time creating a book. Those costs are exactly the same (or even higher for the layout people) for digital.
