We compete in the same way competition works in most labor markets except that, in general, the job market is more favorable for physicians than it is for less skilled jobs. We compete based primarily on what we are willing to do for what price. In areas where there is higher physician saturation, employers are able to find applicants willing to take lower salaries or accept more demanding positions. In areas where there are fewer physicians, the pay is better and the conditions of employment are more favorable.
I suppose that these dynamics tend to work a bit differently in medicine and contribute to the at times starkly higher pay in rural areas than urban areas. I think that, in many other industries, the concentration of workers is higher in urban areas but the concentration of well-paying jobs is disproportionately higher. I think there are many well-paying industries where almost all of the best paying jobs are in major cities. Urban centers tend to have a lot of hospital centers, but there is demand for medicine throughout the U.S. It is not like investment banking where the opportunities for a lucrative career in rural Montana are presumably negligible.
In terms of your second question, that entirely depends on what type of position you find desirable.