Firstly, when you start off your adwords campaigns your cost per click will be higher because your ads are competing with current ads. Once your build a quality score then you start to drop your CPC.
The highest positions aren't always the best, sometimes you get more clicks and less conversions. Try your ads at different positions to get the best results.
Using dynamic keyword insertion can increase your ads CTR by 25% pretty easily.
Example with Normal Ad
This Is Your Title
Blah Blah Blah Line 1
Blah Blah Blah Line 2
www.yourdomain.com
Example with Dynamic Keyword Insertion
{KeyWord:This Is Your Title}
Blah {Keyword:default keyword} Line 1
Blah Blah Blah Line 2
www.yourdomain.com
When the keyword in greater than 25 character you will get the default. This way many of your keywords will appear in your ad text giving you a higher CTR and lower CPC.
Improve your ad quality score by grouping similar words into new ad-groups and then create more targeted ads.
Hope this helps.