It's price discrimination. Some airline users are not price sensitive (the wealthy, corporate travelers with expense accounts) and they don't care about getting maximum value for their dollar. Economy fliers do.

It's also a pretty good subsidy to economy fliers.

Assuming they don't intentionally make economy worse to increase the perceived value of first class.

Lay flat business class seats probably take up the equivalent of ~4 economy seats…

Charging that much seems fine to me, I think doing what you are describing would create a market inefficiency. 5x seems to be what the market is willing to pay for that seat, which is fine. It excludes lower income people from ever taking business class but those higher priced seats help make travel more affordable in the uncomfortable, jam packed rear of the plane