Final answer:
Use the command 'enable secret level 7 cisco' to set and encrypt a password for privilege level 7 on a Cisco router, providing better security with MD5 hashing than the 'enable password' command.
Step-by-step explanation:
To encrypt the password required to access privilege level 7 on a router, the correct command is: enable secret level 7 cisco.
This command sets a password for privilege level 7 and applies MD5 hash encryption to ensure that it cannot be easily deciphered. Using enable secret is preferred over enable password because it provides a higher level of security. It is also important to note that privilege levels allow for a fine-grained access control in Cisco routers, enabling different levels of access for different users.