What does the acid do in this reaction? Which of the following is the product of the series of reactions shown above?
  


The correct answer is (C).

So the first step of the first reaction meant to create an enolate (deprotonating the hydrogen sandwiched between the two carbonyls), which upon addition of the substrate, forms:

.

I think the second step, potassium hydroxide is meant to hydrolyze the ester to a carboxylic acid.  

Finally, the third step is meant to decarboxylate the acid by emitting $\ce{CO2}$. 

However, I'm unsure as to what role the acid plays in the last step.  The only thing I could think of is that the acid helps the enol (the actual product from decarboxylation) tautomerize, but I don't think acid needs to be present for tautomerization.
My guess is that the acid is just there to protonate the carboxylate salt and allow decarboxylation. Hydrolysis of the ester with $\ce{KOH}$ generates the potassium carboxylate salt:

Since the mechanism for thermal decarboxylation involves a cyclic transition state including the carboxyl $\ce{-OH}$ group, I expect that the carboxylate salt must be protonated before decarboxylation can take place, hence the addition of aqueous acid.