Let the radius of the smaller circle be r, making the radius of the bigger circle r plus 7. The difference between their areas is given by the area formula pi times R squared minus pi times r squared, which equals 1078. Substituting R gives pi multiplied by the quantity r plus 7 squared minus pi times r squared equals 1078, simplifying to pi times 14r plus 49 equals 1078. Using the approximation of pi as 22 divided by 7, the equation becomes 22 divided by 7 multiplied by 14r plus 49 equals 1078, which solves to 44r plus 154 equals 1078, yielding a radius of 21 cm for the smaller circle.