Statement (1) is insufficient: if J is somewhere in the circle, K could also be in the circle, as there's plenty of room in a circle with radius 4 for a line segment of length 1. However, if J is near the outer edge of the circle, K could be outside the circle as well.

Statement (2) is also insufficient: it establishes that J is 2.5 away from the center of the circle, but tells us nothing about point K, which is what we're interested in.

Taken together, the statements are sufficient: if OJ is 2.5, then J is 1.5 away from the edge of the circle. Thus, if JK is 1, there's no way that K is outside the circle. Choice (C) is correct.