All other things being equal, if you've set a maximum cost–per–click (max. cpc) bid of usd $1 for your ads, and if the next most competitive bid is usd $0.50 for the same ad position, what is the actual amount you'd pay for that click?
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Answer is - $0.51
The Cost Per Click for a person is calculated on the basis of the CPC incurred by the ad copy above his, in the ad position on the SERP. A person is charged just 1 cent less than the CPC bid for the ad above him. So ideally a person should see that the CPCs his keywords incur are lower or almost the same as the bid he has set for them.
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