Can you please clarify how does "which" refer to plural? Or if the first option had " which have" then would it be the correct choice? Please reply. Thanks in advance
Yes your analysis is correct.
If option A had had have
instead of has
then it would have been one strong contender to OA, but I would still prefer to use where rather than which because where suits to modify a place such as town.
Further, for your first question : Can you please clarify how does "which" refer to plural?
I would say this is one of the signature format of GMAT; some official questions were created to test this logic and further other prep companies also created their own versions. Refer following sentence.
Lake Michigan, one of the lakes that flow through United States, is the largest fresh water source.
... one of plural that verb(plural) ...
... one of plural, which verb(plural) ...
Refer this question and explanation as well : twenty-two-feet-long-and-10-feet-in-diameter-the-am-1-is-12821-20.html#p1381818
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