I find it to be a good question. I'd say in the short run the market would go through all the mentioned stages, and in a long run... I don't know, probably it would settle to be C, comparing to current, illegal business' state.
How about advertising drugs? That would get banned, you can guarantee, but would there be illegal marketing, recruiting and effort to get more clientel?
It would be A, a increase in supply and demand. I think the supply would actually move more, as people would start growing their own weed. Demand would rise slightly, but I don't think non weed smokers would all the sudden decide to become smokers. The increase in demand would mostly come from the people who already smoke. For instance, I don't smoke weed, nor would I if it became legal.
For instance I live in Canada, and decriminalizing weed would not necessarily increase the demand for weed, because it is already so ridiculously easy to get it. Nobody here says, "I smoke weed because its illegal" people dont smoke weed because they dont want to, at least where I'm at.
If anything, A. Probably be an increase in demand due to the increased amount consumed by those who already smoke. the demand part is tricker because little can be assumed about the producer's habits in the market. Will stores sell it? Will they continue to allow street sellers to sell it etc. However, considering the amount of people who smoke (especially here in Canada) I think the smart thing to do would be to increase the supply in order to capitalize on a market that is now legally accessible