Hi Samba,
If I understand it right, you need the city question be shown dependent on the states question, right?
I would go for a 2 (or better said, various drop down lists) if you want to go out of the box. I am sure there is a way to make the list of cities dependend on the state question with Javascript, but this will require some Javascript skill that I don't have.
Unfortunately my solution requires, that you will have as many "city" questions as states. So in the case that you have a lot of states, you will have many city questions.
I would create the state question and then for each state a dropdown with the respective cities. The city questions will be shown/hidden via conditions depending on the choice of the state.
Tpartner might have a Javascript solution for you, though.