Which of the following elements of Freytag's Plot Pyramid is being described here?

"Characters are introduced and the setting is revealed."

C) Climax.

Explanation:

In any story-line, the plot structure will consist of numerous stages which, according to Gustav Freytag, are in five stages. The first is the introduction/ exposition, followed by the rising action, climax, falling action, and finally the conclusion. Through these five stages, we can easily understand the structure of any plot.

In the given excerpt from Franz Kafka's "The Metamorphosis", the two passages create the climax of the whole plot. The climax is when the whole story's main structure came to its highest point, the turning point where the fate of the character(s) or the plot structure depends.  

This stage presents the middle ground which will decide how the fates will change. Likewise, the given passage contains the family of Gregor deciding what to do with him. This scene contains the decision of the family "to try and get rid of it", it being Gregor who has been changed to a bug. This presents a conflict in the story where the fate of Gregor was decided and thus, change his life forever.