Deeply dig into your questions

Good company would like to pay more than average to have best people.

Small company (mostly cash tightened) wants the people that they think good enough while paying less than the average.

Average salary can be searched in job seeking website like www.indeed.com, www.monster.com) for different locations

It every clear what the strategy this company choose.If you don't have job, just say "yes" to question 1 and keep hunting for other opportunity.Even if you have other opportunity, you can reject them in last minutes (usually sign the acceptance on the offer letter)

Question 2 is usually asked when you apply for multiple postions. "You know what you want" is the first step to find a job. I would suggest to target and stick to only one objective. You won't find a job if you don't know what you want. Moreover, you don't even know what salary is appropriate, since it is up to the position and location. It is the market in which you sell merchandises (yourself), not the market in which you shop in different stores and select your merchandise (companies). You are sales, not shopper.