system
Given the following post, respond as if you're commenting on Reddit:
human
How is the concept of Monopsony and the minimum wage or other defacto price/wage floors such as a sectoral based collective bargaining agreements related?
gpt
Great question. So the classic example of Monopsony is if you had a small town and the only employer is a local Amazon warehouse. This will result in Monopsony power because there is only a single buyer of labor. This concept, just like monopoly, can be extrapolated to more complex situations however. Imagine you are an Econ professor. Wherever you live, it's unlikely there are more than two or three employers for your specific human capital. So although you could move, the frictions keeping you from relocation cause the employers to have some Monopsony power over you because you don't have many other options. 
Now, since Econ professors make solid wages, this isn't a super big problem. But if you're a welder, or a construction worker, or have some specialized skill and there aren't many employers in your area, those employers may have Monopsony power. This is why collective bargaining and wage floors in different sectors can be helpful. It can work to push back on the power the employers have on the employees in that sector.