Lets say "computer repair" is $2.50 per click and "monroe computer repair" is $.50 per click when someone types "monroe computer repair" am I competing with the "computer repair" ads or the "monroe computer repair" ads? I hope the question makes sense, I cant think of an easy way to ask it.
You are Competiting with Monre Computer Repair Ads. This is a simple question. As you are bidding on one keyword, so you will be competiting on that keyword only.
Yes, you are competing with shorter tailed keywords. Even if someone searches on "monroe computer repair", advertisers bidding simply on "computer repair" have a chance to get shown. If they outrank you, they will be shown above your ad. The advantage is that the keyword is more relevant and so should your ad. So more people click your ad giving you better quality and thus better ranking over time.
Think of it this way. Google wants to make as much money as possible so anything that will make them more money they will do ;-)