The answer to this is Option C. We can know that this is true because of what Anthony Downs said in his median voter theorem.
The median voter theorem says that political parties have to pursue the median voter. The median voter is the one whose ideas are squarely in the middle of the political spectrum. Fifty percent of the voters are to the left of this person and fifty percent are to their right. It makes sense that parties would have to cater to this voter if there are two main parties. If there are two main parties, they each need to get at least 50 percent (plus 1) of the vote. Therefore, they have to get as close to the median voter’s preferences as possible. To get close to the median voter’s preferences, they have to support policies that are relatively moderate. Therefore, Option C is correct.
As noted above, the correct answer is that parties will tend to take more moderate positions in two party elections. This makes sense, because they cannot afford to alienate large portions of the electorate if they hope to win an election.
However, regarding these "moderate" positions, we see a different thing going on in primary elections. In primaries candidates only have to worry about appealing to their committed base, so their positions on major issues tend to be more extreme, at least in terms of the positions they will take once they win the primary. That isn't to say that they don't move more to the middle in relation to their primary opponents, it just means that the tone of their message is going to change in the general election.
We are seeing this with Donald Trump right now. As the Republican candidate for president, his rhetoric is much milder than it was as a primary candidate. That's because he has to appeal to the voters in the middle, the ones who probably haven't liked his style and approach so far.