I am creating a Survey123 for residents of a city. At the end of the survey, we would like the residents to place a point where they live. Is it possible to show a map with the city boundaries outlined? Which possibly restricts them to only placing points within that boundary?
You can add a custom basemap or web map using Linked Content or adding the custom map you want to use to your organizational basemap group. This can then be used as the basemap in the Survey123 field app and web map, either set as default, or the user can select it. Refer to https://doc.arcgis.com/en/survey123/desktop/create-surveys/includemap.htm#GUID-31B9C45D-8D07-4F0F-A3...
As for applying geofencing or a boundary to restrict where the geopoint can be captured, you can not do this from a layer on the web map, but you can achieve this using constraints or validation on the geopoint question. You can create a simple constraint and use the x,y data of the geopoint to check if the location falls within a bounding box. You can also use the warning and error messages. Refer to https://doc.arcgis.com/en/survey123/desktop/create-surveys/geopoints.htm.