Why are CPUs becoming smaller and smaller?
It's like candy bars.  They keep making them smaller at the same price to increase profit.

Seriosly though, there are good reasons for smaller chips.  The first and foremost is that more chips can be fit onto a wafer.  For large chips, the cost is all about what fraction of a wafer it uses.  The cost to process a wafer is pretty much fixed, regardless of how many chips result from it.

Using less of the expensive wafer is only one part though.  Yield is the other.  All wafers have imperfections.  Think of them as being small but randomly scattered about the wafer, and any IC that hits one of these imperfections is trash.  When the wafer is covered by lots of small ICs, only a small fraction of the total are trash.  As the IC size goes up the fraction of them that hit a imperfection goes up.  As a unreal example that nonetheless points out the issue, consider the case where every wafer has one imperfection and is covered by one IC.  The yield would be 0.  If it were covered by 100 ICs, the yield would be 99%.

There's a lot more to yield than this, and this is greatly oversimplifying the issue, but these two effects do push towards smaller chips being more economical.

For really simple ICs, the packaging and testing cost dominates.  In those cases, the features size is not so much a driving issue.  This is also one reason we have seen a explosion of smaller and cheaper packages lately.  Note that extreme small features size is being pushed by very large ICs, like main processors and GPUs.