I mean, consider: The basic unit of fabricate is the 1 sqaure foot of raw materials. Now, 1 square foot of iron I think I estimated before ways about 400 lbs. The price of iron is 1 sp/lb, so you could buy a cubic foot of iron for 40 gp. So, for 40 gp, you could potentially make 400 Masterwork Daggers, for instance...
Don't you have to make craft checks to create anything finely detailed with the spell? So that's what, ~6000 separate DC 20 checks? And any failed check ruins the material you are working on?
to a theoretical profit to the tune of (400 x 302)/2 - 40 = 60360 gp. Even, if, for the sake of argument, the DM ruled that your saturation of the market drove prices down by a whole magnitude, that would still be a profit of 6000 gp for a mere 400 lbs of iron.
Yeah, for the sake of argument, if I'm your DM:
-1) I've already modified the fabricate spell to cover this issue so that the difficulties and limits of what you can craft (in or out of combat) are clearly specified.
0) You can't make steel from iron. Unless you obtain real ingredients, like forge hammered bar iron in various grades, you end up with gray iron daggers that are exceptionally brittle. Hardness is reduced by 5, and hitpoints are halved. What do real ingredients cost? That's easily enough answered - 1/3rd of the sell price. Says so right in the text. Sure, maybe you could do multiple castings of fabricate to work the ingredients through stages, but that adds time and effort to your plan.
1) Regardless of how many masterwork daggers you have, you can only sell 2-8 a day, because really, how often do people buy masterwork daggers. It's pretty much a just a dress accessory for some nobles, and a kit for a few assassins in town. And that's assuming of course your product is high quality, and why aren't sheaths included in the price like Master Xoppe's Shoppe down the road. You can make sheaths, right?
2) Before you can sell even that many, you'll have to get a shoppe and devote at least 8 hours a day to salesmanship. This means overhead and taxes. If you try to sell them on the street, you'll quickly end up being investigated as a possible thief or con artist.
3) After a week or two of this, you start getting market saturation. Prices are falling, demand is slacking off. Word gets out that this guy has hundreds of identical masterwork daggers. The local Weaponsmith Guild 101 wants to investigate. Where did all this crap come from? They pretty quickly figure out you magic'd them up, so they begin a rumor campaign against you - the daggers are stolen property and you are a fence, the daggers are cursed and will eventual revert to raw iron, or more honestly - do you want to depend on an item that reverts to raw iron the minute someone casts 'Break Enchantment'? Meanwhile, the Guild complains to the local sovereign that there government back monopoly is being threatened; hopefully you paid to join the Guild first, and even if you did you might get fined or kicked out if they find out you've been magicing the daggers into shape.
4) A good long term plan would be to start selling them to ship owners or caravan masters to expand your market. You could concievably sell lots of these at say a 50% discount to wholesalers, but eventually even that is going to bring you trouble.