Certified_SEM - 2:46 pm on May 2, 2013 (gmt 0)
Google Adwords automatically assigns a quality score once your keyword is added in, after initial data comes in, this quality score will change-sometimes dramatically-and will continue to fluctuate based off CTR, Ad relevance, and landing page relevance. I haven't paid much attention to first page bid estimates and how/when they are updated. First page bid estimates are usually a little high for what the intent is for us- to get on the first page. Typically, in the past, if i match the first page bid estimate, it will put my keywords between 4-7 position. This is my experience over managing 40+ adwords clients over the last 2 years.
As far as a proper CPC bid, that is highly determiniate on incoming data. You have to look at your average page position that your ad is showing up while keeping in mind the CTR and the conversion rate...some ads perform better at the number 4 position than the number 3 position, so why pay more to show up higher? Some customers have a higher site engagement or a lower bounce rate on page depending on the ad position as well.
These are just a few things that will determine how high you want your cpc bids.
Hope this helps!