Can we create Junction object with one master-detail and one lookup field

I can't offer you any insight into why you cannot do this, you just can't unfortunately, it's a seemingly arbitrary limitation of the platform and the Product2 object. Unless someone who knows about the internals of the platform comes across this I doubt you'll ever get a definitive answer.

In terms of working around it though, the only way to achieve this is to create your lookup as a standard non-required Lookup and then enforce that the value of this lookup cannot be blank using a validation rule.

Your validation rule will look something like this:

ISBLANK(ProductId__c)

If the Product is deleted then this will result in the value of the field being cleared, as per the default 'Clear the value of this field.' behaviour, which will prevent you updating the child record until a valid lookup ID is entered.

If you want to change this behaviour you'll have to write a before delete trigger on Product2 with your desired logic.

There are a few rules that may help you. A custom object cannot be the master to a standard object. Master detail relationships can only be created where there are not existing records in the object on the detail side of the relationship. If this does not help you, it would help to have more information on what objects are masters and which objects are being used for detail. Thanks