**Core Concept**
The patient's symptoms of paranoid delusions and auditory hallucinations suggest a psychotic disorder, likely schizophrenia. Schizophrenia is a chronic mental disorder characterized by distortions in thinking, perception, emotions, language, sense of self, and behavior.

**Why the Correct Answer is Right**
The patient's symptoms of paranoid delusions and auditory hallucinations are classic features of schizophrenia. These symptoms are thought to be the result of an imbalance in neurotransmitters, particularly dopamine and serotonin, in the brain. The patient's family history and lack of a clear precipitating factor also support a diagnosis of schizophrenia. The paranoid delusions and hallucinations are likely the result of a disruption in the normal functioning of the prefrontal cortex and the limbic system, which are responsible for regulating emotions and behavior.

**Why Each Wrong Option is Incorrect**
**Option A:** This option is incorrect because it does not accurately describe the patient's symptoms. The patient's symptoms of paranoid delusions and auditory hallucinations are not characteristic of a mood disorder such as depression.

**Option B:** This option is incorrect because it does not accurately describe the patient's symptoms. The patient's symptoms of paranoid delusions and auditory hallucinations are not characteristic of a personality disorder.

**Option C:** This option is incorrect because it does not accurately describe the patient's symptoms. The patient's symptoms of paranoid delusions and auditory hallucinations are not characteristic of a substance-induced psychosis.

**Clinical Pearl / High-Yield Fact**
It's essential to note that schizophrenia often has a gradual onset, with symptoms developing over several months or even years. Early recognition and treatment can significantly improve outcomes.

**Correct Answer:** C. Schizophrenia.