Answer: Limits on transaction costs

**Explanation:** - **Option A (Incorrect):** Restrictions on short selling hinder arbitrage trading, which is essential for correcting mispricings and improving market efficiency. - **Option B (Correct):** Imposing limits on transaction costs reduces the expenses associated with trading to exploit market inefficiencies. Lower transaction costs encourage more investors to participate, increasing the number of market participants and thereby enhancing market efficiency. A higher number of participants is a key driver of market efficiency. - **Option C (Incorrect):** Restrictions on trading by foreign investors reduce the number of market participants and limit trading activity. This can exacerbate market imperfections and decrease efficiency, as seen in markets like China where such restrictions are prevalent.

Author: LeetQuiz Editorial Team