One factor the Google Ads system uses to calculate an ad’s actual cost-per-click (CPC) is the:

One factor the Google Ads system uses to calculate an ad’s actual cost-per-click (CPC) is the:

  • Maximum CPC bid of the ad showing one position lower on the page.
  • location targeting of the ad showing one position lower on the page.
  • cost-per-thousand impressions (CPM) of the ad showing one position lower on the page.
  • Ad Rank of the ad showing one position lower on the page.

The correct Answer is:

  • maximum CPC bid of the ad showing one position lower on the page.
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Explanation: Theone factor the Google Ads system uses to calculate an ad’s actual cost-per-click (CPC) is, maximum CPC bid of the ad showing one position lower on the page /Actual cost-per-click (CPC) of the ad showing one position lower on the page.

If the advertiser immediately below you bids US$2.00, and if that advertiser’s ad is the same quality as yours (and has equal-performing extensions and ad formats), you’d typically need to bid a penny more than US$2.00 to rank higher than that advertiser and still maintain your position and ad formats. With Google Ads, that’s the most you’ll pay (about US$2.01), whether your bid is US$3.00, US$5.00, or more.

Read more here: https://support.google.com/partners/answer/6297?hl=en