Explanation
Correct answer: C.
Choice C is the best answer. The convention being tested is pronoun-antecedent agreement. The singular pronoun "it" agrees in number with the singular antecedent "industry" and clearly indicates that the industry consists of just one or two suppliers per municipality.
Why the other choices are wrong
Choice A
Choice A is incorrect. The plural pronoun "these" neither agrees in number with the singular antecedent "industry" nor clearly indicates that the industry—not another plural noun in the sentence, such as "start-up costs" or "barriers"—consists of just one or two suppliers per municipality.
Choice B
Choice B is incorrect because the plural pronoun "they" doesn’t agree in number with the singular antecedent "industry."
Choice D
Choice D is incorrect because the singular pronoun "this" is ambiguous in this context; the resulting sentence leaves unclear what consists of just one or two suppliers per municipality.