Can someone please explain where I am mistaken in my understanding of CPC?

Please tell me if I am confused or wrong about something. Because I am confused! lol

I want to know about Google Product ads on Google shopping and how it differs from the bidding structure in adwords. (if at all)

The way I understand CPC in general is that you are bidding on a keyword. So when you make an account and they ask you Maximum daily limit, that just tells Google you dont want to spend more than that. Then it will also ask if you want automatic bidding to maximize clicks/conversion, etc. and finally also let you set a maximum CPC amount.

I did a test and put a maximum of $5 daily limit and $0.25 on max CPC amount for a product ad. I typed in the keyword under "New Ad group" and pressed the button called "Estimate Search Traffic". Well they give you 3 results: 1) Avg. CPC 2) Clicks/Day 3) Cost/Day. Sounds simple enough.

The results for $5 daily limit and $0.25 gave me these results. 1) Avg CPC $.08-.10 2) 17-20 clicks/day 3) $1.60-$2.00

So, it's saying that I bid 25 cents but I would most likely get it for 8-10 cents, which will bring me roughly 17-20 clicks for the day and cost me about $2?

That doesnt make sense. I went ahead and changed the max CPC amount in my campaign and pressed "Estimate Search Traffic" again but this time the max CPC amount was $5. It says that Avg CPC will be $1.75-$2, clicks per day is only 2, and cost per day about $5.

How is setting my max bid higher making the clicks and Avg cpc change FOR THE WORSE??

Could someone explain this to me?

edit: i also need some clarification on how you can set this to phrase or exact matches, what position you will be, etc.? Is that even an option