Well, it is a small market, which admittedly is part of the reason books (along with everything else) are so expensive in Norway, but mostly they charge what they charge because they can. After all we're one of the wealthiest countries in the world and like the rest of the developed world have adopted consumerism as our chief religion.
As far as Iceland goes, part of the reason their books are cheaper is that they have always had a deliberate policy of promoting and protecting their language, precisely because they are so few and so isolated. Encouraging people to read more is, of course, the best way of doing so.
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