Going by the the ambiguity of 'dorp' in Dutch, and the fairly clear distinction between 'town' and 'city' in English, I really fail to see why the translation: 'Is it a town or city?' is not accepted. In English a village is considered to be a small town, somewhere between a hamlet and a town.
Town doesn't have a direct translation is Dutch and can mean either Stad or Dorp so I think the given translation is more accurate since it is unambiguous. (based on the reliable source wikipedia https://nl.wikipedia.org/wiki/Town) But it doesn't mean you are wrong.
Historically a Dutch 'stad' has 'stadsrechten' but nowadays it's more related to the town size (> 50.000 residents), although this isn't a formal definition.
Hi Hugo, thanks for your answer. Makes me wonder whether it would be clearer if Duo removed 'town' as a translation for stad? In other seemingly similar questions, I have used town successfully. Perhaps just more explanation about when it can correctly be used and when it can't might be useful if the terms don't have direct translations, or if the translations vary according to context, as they seem to here.
In my English experience we don't often use the word 'village' for modern small municipalities, town would be much more common to mean smaller than a city.
A village has a more community notion to it, or a historic (i.e., in the past, not just old) connotation. Village is also sometimes used to name neighbourhoods or developments within cities.
From this perspective, I had assumed that 'dorp' would best translate to town, but it seems to always translate to village. Is that the intended meaning?