Translation:The wardrobe on the second floor is bigger than the closet.
Duolingo has an extra space here. This floor is 이 층, but the second floor is 이층. Other floors are 삼층, 사층, 오증, etc. In the past, however, it was not uncommon to not have a "fourth floor" because the number 4 is bad luck to many, just like 13.
As to Korean being in the beta phase, be patient. If you think that your answer is correct, suggest that they add it to the list of "correct" answers. I have done so more than once and they accepted the suggestion.
I'm sorry to let you down but, because in context the number of the floor always goes before 층 and 에 있는 added to this sentence specifies which floor "it is on". I don't think this sentence would ever mean "This floor".
If you wanted to say "This floor's " you would say 이 층의 옷장은 벽장보다 큽니다. This would show that you are referring to the floor that you are currently on.
Hope that kinda helps you understand :)
I'm not a expert, so I might revoke my previous answer after looking at it again. LOL
But if this was a spoken sentence we could look at the context, but since it's written I am actually leaning towards your translation since there is a space between the two words, which I just came to realize!!
I'm pretty sure Duolingo should use 2층 for second floor and 이 층 for this floor. Because it is super confusing without the differentiating.
저는 이 층에 살아요. ( I live on this floor.) 저는 2층에 살아요. (I live on the second floor.)
So, In my conclusion. "The wardrobe that is on this floor is bigger than the closet." seems like the most legit translation for this one!! :)
Your translation is indeed correct. To answer KaylaTheChamp's comments, it is true we almost always write 이 층 (the 2nd floor) with a numeral, so if that was actually written somewhere, it is highly likely that 이 층 refers to "this floor". However we do not use numerals (not just the Korean course but all the other courses) since all this is for practising the language. As I mentioned in other comments, spacing does not matter here.