Re: How is the cost per click calculated?
Google's chief economist Hal Varian explains it in a one-minute video. Basically, they multiply the bid and QS of the advertiser below you and divide by your QS. So, if
competitor bid = $0.30
competitor QS = 7
your QS = 6
your cost = 7 x 0.30 / 6 = $0.35 if you bid at least that much.
Note this is simplified. QS are actually many decimal places.