Psychosocial theory, developed by Erik Erikson, is a psychological theory that emphasizes the importance of social and emotional factors in human development. It posits that individuals go through eight stages of psychosocial development throughout their lifespan, each characterized by a specific conflict or crisis that must be resolved for healthy development to occur.

The correct answer to the question is option 'C', which refers to the industry versus inferiority stage. This stage occurs during middle childhood, between the ages of 6 and 12 years, and is characterized by the conflict between developing a sense of competence and industry versus feelings of inferiority.

- **Industry versus Inferiority stage:**
During the industry versus inferiority stage, children are faced with the task of mastering new skills and developing a sense of competence in various areas, such as academic, social, and physical skills. They strive to achieve success and recognition from their peers, teachers, and parents. If they are successful in their endeavors, they develop a sense of industry, which refers to a belief in their abilities and a motivation to work hard to achieve their goals. On the other hand, if they experience repeated failures or receive negative feedback, they may develop a sense of inferiority, which can lead to feelings of incompetence and low self-esteem.

- **Other options:**
Option 'A', stimuli and response, refers to the principles of behaviorism, which focus on the relationship between stimuli and responses and how they shape behavior. While Erikson's theory does incorporate elements of behaviorism, it goes beyond simple stimulus-response associations to include the influence of social and emotional factors.

Option 'B', phallic and latency stages, refers to stages of psychosexual development proposed by Sigmund Freud, not Erikson. Freud's theory focuses on the role of sexual instincts and desires in human development, while Erikson's theory is broader and includes both biological and social factors.

Option 'D', operant conditioning, is a learning theory proposed by B.F. Skinner that emphasizes the role of reinforcement and punishment in shaping behavior. While operant conditioning can be applied to aspects of psychosocial development, such as how rewards and punishments influence behavior and learning, it is not the main focus of Erikson's theory.