The following graph depicts the market for potatoes in West Virginia. Assume there are similar markets for potatoes in all other U.S. states and that the potatoes sold in all states are identical. Further, assume potato sellers incur zero costs to transport potatoes between any U.S. state and that there are no other barriers to trade. Use this graph to answer the next two questions:

-Suppose the equilibrium price of a pound of potatoes in all U.S.states is initially $1.20.Further,suppose there is an increase in potato demand in all U.S.states except West Virginia.This increase in demand causes potato prices in all U.S.states,except West Virginia,to increase.If the law of one price holds,potato sellers will eventually adjust the relative quantity of potatoes they sell in all U.S.states,including West Virginia.After this adjustment:
A) the West Virginia potato supply curve will shift rightward.
B) the West Virginia potato demand curve will shift rightward.
C) potato prices in West Virginia will fall and potato demand will increase in all other U.S.states.
D) the price of a pound of potatoes in all states that share a border with West Virginia will not change.
E) the price of a pound of potatoes in all states that share a border with West Virginia will fall.
Correct Answer:
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