What is the effect of deregulation in a market?

Deregulation in a market typically leads to a reduced set of rules and restrictions that previously governed the operations of firms within that market. When regulations are lifted or relaxed, it becomes easier for new suppliers to enter the market, as there are fewer barriers such as licensing requirements, compliance costs, and restrictive operational mandates. This increase in the number of suppliers contributes to enhanced competition, which can lead to innovation, improved services, and overall benefits for consumers.

The presence of more suppliers also helps in driving prices downward, as firms compete for customers. Therefore, the correct answer indicates that increased entry of suppliers is a significant and positive effect of deregulation, fostering a more dynamic and competitive market environment. This dynamic often results in better outcomes for consumers and increases the variety of choices available in the market.