Lyn, I believe it's a little of all three of those reasons plus one more. More than half of the worlds militarys (and terrorists) use the AK-47 and the 7.62x39mm round it shoots.
And old Hugo Chavez has ordered bunchs if it too...
Just over a year ago I could have gotten it (and did) for $89 per K. Now it's more like double that.