Step 1: Picture the graph.
Plot stress on the horizontal axis and performance on the vertical axis. The line rises, peaks, then falls, like an arch.
Step 2: Find the peak.
The top of the arch sits in the middle of the stress scale, not at either end.
Step 3: Left end of the graph.
Zero or very low stress gives low alertness and weak effort. Options 2 and 4 sit here, so both are wrong.
Step 4: Right end of the graph.
Very high stress brings panic and mistakes. Option 1 sits here, so it is wrong.
Step 5: The middle.
A moderate level keeps us alert and ready without being overloaded. This is option 3.
Step 6: Real life check.
A little pressure before an exam helps us revise well, but too much leaves the mind blank. This supports option 3.
Final Answer:
The peak of the arch is a moderate stress level, option 3.\[ \boxed{\text{Moderate level of stress}} \]