The numbers of choices in each category are multiplied together. We assume the order of paint choices matters: using color 1 in area A and color 2 in area B is not the same as using color 2 in area A and color 1 in area B.
P(7,2)*4*3*2 = 42*4*3*2 = 1008 ways
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P(n, k) = n!/(n-k)!
P(7, 2) = 7*6 = 42