Shakespeare's popular play Merchant of Venice belongs to which of the following literary forms?

Option 3 : Tragicomedy

The correct answer is tragicomedy. 

•  The Merchant of Venice is a 16th-century play written by William Shakespeare about the conflict between a Venetian Christian merchant named Antonio and a Jewish money-lender named Shylock. 
• It is believed to have been written between 1596 and 1599, and is best known for Shylock and his famous demand for a "pound of flesh" in retribution, as well as its "Hath not a Jew eyes?" speech on humanity. A debate exists on whether the play is anti-Semitic.
• The play was entered in the Register of the Stationers Company by James Roberts on 22 July 1598 under the title "the Marchaunt of Venyce or otherwise called the Jewe of Venyce." 
• Although classified as a comedy in the First Folio and sharing certain aspects with Shakespeare's other romantic comedies, The Merchant of Venice ends on a sour note, as Shylock is forced to forfeit his entire property to the daughter who hates him, and is forced to convert to Christianity under penalty of death. Thus, modern critics have categorized the play as a tragicomedy which is discriminatory towards Jews. 

Therefore, Option 3 is the correct answer.

•  English society in the Elizabethan and Jacobean era has been described as "judeophobic". In Venice and in some other places across Europe, Jews were required to wear a red hat at all times in public to make sure that they were easily identified, and had to live in a ghetto. 
• Shakespeare contrasts the mercy of the main Christian characters with the Old Testament vengefulness of a Jew, who lacks the religious grace to comprehend mercy. 
• It is possible that Shakespeare meant Shylock's forced conversion to Christianity to be a "happy ending" for the character, as, for a Christian audience, it saves his soul and allows him to enter Heaven. That is the reason why it was classified initially as a comedy, but later critics have denounced it as a tragicomedy.