Smita04
Bunuel, can you please comment on this? Is it not a GMAT type question? If that is the case, then there is no point discussing it.
Hi Smita04,
This is very much a GMAT query.
Evaluating statement 1 only:Here, we know that the length of the two sides are 7 cms and 14 cms respectively. Now just picture this. Let us try to a triangle with base = 14 cm and then try to put the 7 cm side such that ther area is the maximum.

Let the side AB = 7 cm and BC = 14 cm. The figure shows 3 possibilities for AB that would result in the maximum possible area for triangle ABC.
Now, we k now that area
= 1/2 * base * altitude = 1/2 * BC * altitude.
Now, the area will be maximum for the maximum value of the altitude. This is only possible with AB as the altitude, as in the other two cases the length of the altutide goes down.
Hence, ABC is right angled and the maximum area = 1/2 * 14 * 7
We can eliminate options B, C and E.
Evaluating statement 2 only:Let us picture this.

Let side AB = 7 cm. Now depending on the size of the circle, the area of the triangle can keep increasing. Hence, statement 2 alone is insufficient.
Hence D is eliminated.
Answer is A.
Hope this helps.
Regards,
Shouvik.