Fire Arc is a firebending attack that creates an arc of fire. You can throw it by left clicking and it will light on fire the spot where it landed or will start burning the entity it hit.
As with all other abilities, there are two choices for Fire Arc's level IV upgrade.
Large fire: Can make even more fire upon landing
This upgrade offers more fire upon landing if you use this ability to ignite things in the distance. It doesn't help with the damage at all.
Boomerang: Comes back upon a successful hit
Boomerang is a good upgrade because it allows you to re-use your already generated fire arc as long as you hit the desired enemy. If you don't aim well you're not getting the free damage,