While I agree that you need to know a lot to be able to evaluate whether you are being overcharged on a used bike, I think you should return the bike and never buy so much as an inner tube from that shop again. It sure sounds like they took advantage of you, and that is valuable information. The main reason to use an LBS is because they know more than you do, and if they use that knowledge to rip you off instead of provide a service, stay away from them.

However, when it comes to buying your first bike, you need help to get a good fit on a style of bike that fits your usage while staying within your budget. An honest LBS is tailor-made for what you need -- but you need to find the right shop. Ask around or do an internet search to find a good shop not too far from you (if you don't have friends who ride, go to the nearest trailhead and ask an assortment of strangers for suggestions. Commonly, one or two names will keep recurring in the recommendations. Start with those places and see if it feels comfortable to do business with them.)