Why does combining a PDF cause its size to be significantly larger? I have 3 files about 40 KB each. When I combine them using Preview and save them as a single PDF file, instead of having a size close to 120 KB, the size is closer to 500 KB.

Why does this happen, and is there any way to retain a small file size when the files are combined?
PDFs are funny creatures because Postscript is a very "fat" language; the same PDF can be written multiple ways. I would say that the extra code is probably glue code to put those three documents together and extra bits placed there by whatever utility was used to combine the three. 

The best way to get rid of this would be to open the PDF in Acrobat Professional (not Reader) and run it through the "Reduce File Size..." command. This strips out any dead or unnecessary code, optimizes fonts (if two instances of the same font exist, the PDF is rewritten so that only one instance exists), and the like. 

Ghostscript probably has a function that does something similar, but off-hand I'm not sure which one that would be.