The area of a circle is determined by the radius, so this question can be thought of as "What is the longest radius possible if all the points of the circles must have non-negative coordinates?"
non-negative coordinates are only possible if the circle stays entirely in the top right quadrant. The center of the circle is at (4,7) so it is 4 units to the right of the vertical axis (y-axis) and 7 units above the horizontal axis (x-axis). As the circle gets larger and larger, the first points to fall outside of the top right quadrant will occur when the circle crosses the vertical axis.
Therefore to keep all points non-negative, we must be sure that the radius is not longer than the distance from the center to the vertical axis. The radius cannot be greater than 4, which means that the area cannot be greater than 16pi (because area is pi*radius^2)
If you need illustrations to better understand this, have a look at
GMATPrep question 1525. You can practice similar questions if you have access to the
Solutions Engine drill generator by selecting topic="Geometry, Coordinate" and difficulty="500-600"
Good luck,
-Patrick