Nutty Nuts is a monopolistic firm in the market for nuts. The following equations describe the demand for, and the cost of producing nuts, where Q is output in thousand pounds, and P is price per pound. Demand: P = 31 - 3Q Marginal Cost: MC = 3 + Q Total Cost: TC = 3 + 3Q + 0.5Q2 Consider that after filing for bankruptcy and engaging in a legal battle with neighboring landowners, the government decides to dissolve the monopolist, and the market becomes competitive. Given the perfectly competitive market outcome, one would expect that in the long run,:

a. the market price and the number of firms in the market will both decrease.
b. the market price and the number of firms in the market will both increase.
c. the market price will decrease but the number of firms will increase.
d. the market price will increase but the number of firms will decrease.

A monopoly exists when there is one supplier of a particular good or service in the market. A monopolistic firm has full control of the market, and therefore sets the price and the supply of a good or service. Typically a monopoly usually selects a higher price and also lesser quantity of output to be supplied. There is also a high barrier to entry.

When the government dissolves the monopolist, and the market becomes competitive, this will lead to more firms coming into the market. As a result of more firms coming to the market, there'll be cheaper price of goods. The market price which is determined by the forces of demand and supply will decrease.