Step 1: Power developed by an engine is related to torque and engine speed by \(P = \dfrac{2\pi N T}{60}\), so power is the product of torque and speed (with a constant factor).
Step 2: As engine speed rises from idle, torque first climbs to a peak at some middle speed, then begins to fall as speed increases further due to reduced volumetric efficiency and increased friction losses. Power, being torque multiplied by speed, keeps rising for a while even after torque has started to drop, because the rising speed compensates for the falling torque, until eventually falling torque wins out and power also peaks and then declines.
Step 3: Because of this, the engine's peak torque point always occurs at a LOWER rpm than its peak power point. This is a standard, well known feature of every tractor and automotive engine's torque and power curves.
Step 4: So maximum torque is generated at a speed lower than the speed at which maximum power is generated, matching option 2.