Unless there was nobody bidding more than you, or nobody whose (bid * quality score) was better than yours, you won't get those 500 clicks at $0.25 anymore. Your ad will now appear higher than some other ad it appeared below in searches, and you'll pay what it costs to outbid that other advertiser. Increasing your bid almost always results in increasing your average CPC.
If you are bidding on searches where there's no competition, bidding more almost always means paying more for no benefit, too. I have bids on my searches related to my sites' brand names, which nobody else advertises on. When I set a CPC of $1 per click, Google would charge me something like $0.65 per click. When I dropped the bid to $0.50, they'd charge me $0.35 for the same clicks on the same placement. If I bid too little, they won't show the ad at all.
If you are bidding on searches where there's no competition, bidding more almost always means paying more for no benefit, too. I have bids on my searches related to my sites' brand names, which nobody else advertises on. When I set a CPC of $1 per click, Google would charge me something like $0.65 per click. When I dropped the bid to $0.50, they'd charge me $0.35 for the same clicks on the same placement. If I bid too little, they won't show the ad at all.