I think the whole idea with VPS, is that you can share resources, so there is nothing wrong with that, its the overselling part that should be of concern and I have no reason to believe that DO is overselling. Their performance is pretty good.
The point I was trying to make referring to the OP, that VPS like DO can be profitable even at such a low price, because of the way VPS work. Even with very small revenue, if you have enough customer you can make good money. That's why the math works. Most other KVM offerings are so expensive because they don't have that tipping point scale to make them profitable with the same price. But other hosts like Linode gets away with charging more, because of reputation. They already have a good thing going, unless they starts losing customers drastically, they don't have to change their pricing model.
Yes, most users won't use all the allocated resources. They probably do oversell, but they do deliver the resources if you use them.
Most vps providers have a rule that you are not alowed to use 100% 24/7/365 or they can cancel your account (I don't know if this is true with DO). The trick is that if you have a lot of customers you can spread the cost on users who are not using full resources (which happens to be most users), at large scale you can make decent profit in this kind of setup, even if your revenue per account is low.
I didn't mention bandwidth because at DC level, BW is the least expensive component, but it is also true that most users will not use up 1TB per month.
Most of it is speculation from my part, and a bit from experience.