Obviously the cost will drop dramatically based on the number of production. HOWEVER, think about this scenario. A generic paper filter costs a manufacturer 50cents and the K&N one is $1. That is double the cost. If your making 100,000 units that 50cent increase would equate to $50,000. Is the company (any company really) going to make $50,000 more just because of a K&N filter? Remember this was just on 100,000 units.
Higher end vehicles, while not K&N do have higher quality filters (some paper and some even use foam). More specifically, Mercedes for example will higher a company to build an air filter to their exact air flow specifications. Cheaper cars such as Chrysler's bid out air filters to whomever is cheapest. The filter is made to fit the application (sizing) with no regard for air flow specs. In other words, the Walmart fram filters are all same with regards to air flow and paper element. Sizing is obviously the differentiating factor.
At the end of the day, its a lot of hocus pocus on a $20K car. In reality it will add 1HP (maybe) and max 2mpg. Not a huge bump in performance. I buy these for the convenience of never having to buying another filter.
Sorry for running on! Hope this helps.