The bottom line is that some products just aren't suited to adwords advertising. However, there may be supplimentary money makers. For instance, maybe the $5 product draws people in, but they make larger orders while at your site. Or, maybe you lose money on that first sale, but your product gets so many return buyers that you make money on the customer in the long run. Or, you gather the email address of the customer at sale time and are able to make more money later with your newletter or whatever.
A of this requires good tracking to sort out. In the mean time, a good semi-universal strategy is to write a really well targeted ad and start with a fairly high minimum bid. Then, lower the bid to your comfort point. By now, the system should have noticed how relevant your ad was, and you may not really lose much position by lowering your bid. And, if you do, that's okay, because you want to be in your "money making zone" and position doesn't necessarily matter that much.