Left-handed Hummingbird said:We (...well some of us) seem to agreee on the idea that multiplying the price is basically more sound than adding a flat value to the cost. Determining the exact multiplier is hard, since D&D makes no effort to create any resemblance to a working economy. And... it's a game so...
There are still a couple of problems there though. Let's use a 6x multiplier for the example. With the dagger you have very little reason not to spring for masterwork. 1gp vs. 6gp is trivial even at first level for the most part. With a mighty composite longbow, however, you end up with a cost of 3000gp, which is rather prohibitive, and escalates the cost of magic weapons too since all magic weapons adds the masterwork cost. With full plate armor things also get ugly.
I think that the problem is not very easy to solve in an elegant way. Adding two prices (regular/masterwork) to each and every item on a case-by-case basis would be one method, but would be rather cumbersome.