Questions: In a conflict between federal and state laws, federal laws take precedence and will override state laws.

The answer is: In a conflict between federal and state laws, federal laws take precedence and will override state laws.

Explanation for each option:

1. As a sovereign institution, the state government only needs to obey the limits that it establishes for itself.
   This statement is incorrect. While states have certain powers and sovereignty, they are not entirely autonomous and must adhere to the U.S. Constitution and federal laws, which can impose limits on state authority.

2. Federal laws will be supreme in the national sphere, and state laws will be supreme in local affairs.
   This statement is partially correct but misleading. While state laws govern local affairs, the supremacy clause establishes that federal laws are the "supreme Law of the Land," meaning they can override state laws even in local matters if there is a conflict.

3. In a conflict between federal and state laws, federal laws take precedence and will override state laws.
   This statement is correct. The supremacy clause, found in Article VI of the U.S. Constitution, establishes that federal law takes precedence over state law in the event of a conflict.

4. In the federal system established by the Constitution, the true source of sovereignty is Congress.
   This statement is incorrect. While Congress is a significant part of the federal government, the true source of sovereignty in the U.S. federal system is the Constitution itself, which establishes the framework for both federal and state governments and their respective powers.