Explanation:

• Option A (Correct): An increase in transaction costs leads to a wider discrepancy between the market price and the efficient price. Higher transaction costs deter traders from exploiting market inefficiencies, thereby reducing market efficiency. For inefficiencies to be exploitable, the price discrepancy must exceed the transaction and information-acquisition costs to yield a profit (adjusted for risk).

• Option B (Incorrect): Financial disclosure regulations promote fairness and efficiency in markets by ensuring transparency and preventing illegal insider trading. These rules do not decrease market efficiency.

• Option C (Incorrect): A larger number of market participants enhances efficiency. When many investors actively monitor financial markets, any mispricings are quickly corrected as participants act to eliminate them.