I can't disagree with you on the semantic distinction. Google Translate (which I use to check when I have doubts about translations, though I don't count it as authoritative)j says this sentence does translate to "This city is industrial." and "This is an industrial city." should be "Esta es una ciudad industrial." So not being a native Spanish speaker, I don't know whether DuoLingo has this one wrong, or if it is one of those peculiarities of how a language translates. :(
I agree that the two have slightly different meanings and could be used in slightly different situations. But I think that in most situations they could all translate into one another. I'd actually favour, at least in english "This is an industrial city" because it sounds better/more natural. Though I kind of wish DL would make up it's mind - does it want more direct translations, more natural translations or both?
Because, in this instance DL is wrong. In different English speaking countries the words may be interchangeable or reflect a status unrelated to size or importance. In England almost every city was the seat of a bishop and remains a city even if it has been hugely outgrown by neighbouring towns. The monarch grants city status on special occasions - big royal birthdays or jubilees, turn of the century. My home town, Bradford in the industrial North, had grown to 250,000 people by 1897, when Victoria celebrated 60 years on the throne. It was one of the towns granted city status in that year. The council building was still called the Town Hall in my youth, though officially changed to City Hall in 1947. It got a bishop in 1920 (and will lose its diocesan status next year). City Hall still stands in Town Hall Square!
Duo's translation is definitely a mistake. "Esta ciudad es industrial" translates to "This city is industrial." The Spanish for "This is an industrial city" is "Esto es una ciudad industrial." In the first sentence, "esta" is the feminine demonstrative adjective meaning "this." In the second sentence, "esto" is the non-gender specific pronoun meaning "this."