The thermal equator is the line along the Earth`s surface where the average temperature is highest. It is not located exactly at the geographic equator (option 1), but slightly north of it (option 3). This means that the regions just north of the geographic equator generally experience higher average temperatures compared to regions at the equator itself.

Option 2 states that the thermal equator is south of the geographic equator, which is incorrect. The average temperature is generally higher in countries located just north of the geographic equator, not south of it.

Option 4 suggests that the thermal equator is located at the Tropic of Cancer. However, the Tropic of Cancer is located at approximately 23.5 degrees north of the equator and represents a specific latitude line, not the line where the average temperature is highest. Thus, option 4 is incorrect.

In conclusion, the correct answer is option 3 because the thermal equator is generally found north of the geographic equator, where the average temperature is highest.