Bill Cobb spent a good chunk of the keynote address at eBay Live in June addressing this.
.01 for an item and $20.00 to ship is excessive. Items like that hurt the marketplace he said, and I agree.
You can probably Google the video of his speech and listen to it. You will hear they are very committed to stopping this.
If you wanted to charge $7.95 with say $12.05 shipping they probably wouldn't be able to stop that.
Here is an audio version of the eBay Live 2006 keynote:
At the bottom of that page you'll see a link to a video version of the keynote on AuctionBytes.com