Why are out of state ads showing locally?

[Webstercat]

I have my campaign to show in local area, defined by multiple towns in the region I want to reach.

When I search for some of my keyword terms I see ads for out of state businesses.

My question is, did the person setting up the campaign not set it up for regional search or is this a Yahoo oddity?

Question number two. I set some bid prices very high just to see if ads are running and notice that when clicked the max bid price is not the price I'm charged. Is this Yahoo's version of Quality Score?

Thanks for your assistance.