I understand the feeling--It is difficult to get used to the conventions at first.
On the GMAT, we are told the following about figures:
"
Figures: A figure accompanying a problem solving question is intended to provide information useful
in solving the problem. Figures are drawn as accurately as possible. Exceptions will be clearly noted.
Lines shown as straight are straight, and lines that appear jagged are also straight. The positions of
points, angles, regions, etc., exist in the order shown, and angle measures are greater than zero. All
figures lie in a plane unless otherwise indicated.
"
As far as solving the problem goes, you know that the center of the circle is (r,r) since the distance from the y-axis to the center is r, and likewise for the city-axis. You don't need to know that m intersects the origin at a 45 degree line to solve the problem, but you could figure that out based on having a right isosceles triangle.
Also, note that this is a GRE question, not GMAT question. GRE questions will loosely help with GMAT, but you're better off just using GMAT materials.