The Nernst equation is used to calculate the cell potential at non-standard conditions. The equation is given by:
\[
E_{{cell}} = E_{{cell}}^o - \frac{RT}{nF} \ln \frac{[{products}]}{[{reactants}]}
\]
For the given reaction, the number of electrons (\( n \)) is 2. The cell potential depends on the ratio of concentrations of the ions involved. In this case, the correct form of the Nernst equation is:
\[
E_{{cell}} = E_{{cell}}^o - \frac{RT}{2F} \ln \frac{[{Mg}^{2+}]}{[{Ag}^+]}
\]
Thus, the correct option is (3).