Contrast the market demand/supply curves?

[jolie]

Contrast the market demand/supply curves and the individual firm’s labor supply/demand curve in a perfectly competitive labor market. How does the law of diminishing marginal returns affect a firm’s demand for labor?

[werner72]

The market demand curve is downward sloping, the supply curve is upward sloping. The individual firm in a perfectly competitive market is a price taker, meaning they do not have any direct influence on supply or demand and therefore the demand curve is horizontal at the market price. What limits the firm's ability to participate in that demand is the cost structure for the firm.

Since the price is set by the market, and fixed costs must be paid in the short term regardless of revenue, the firm will produce as long as the price covers the variable costs.

The law of diminishing marginal returns says that at some point, the benefit of adding an additional worker will be less than the cost of the worker, due to having too many workers to remain efficient in the physical environment they are in. This would increase marginal costs, and result in the firm being unwilling to hire the worker that moves the cost above the price