When the film size is decreased, the image captured becomes smaller due to the concept of magnification, which refers to the relative size of the image compared to the object. However, this assumes all other factors remain the same and does not automatically mean the image will be distorted.
When the film size is decreased from 14 x 17" to 8 x 10", the image size on the film will become smaller, assuming all other factors remain constant. This is due to the concept of magnification, which is the ratio of the image height to the object height. In photography and imaging, a smaller film or sensor size means that less of the scene can be captured, thus displaying a smaller portion of the subject compared to a larger film. However, if referring to the size of the individual features within the image (when projected or viewed at the same size), these would appear larger because the smaller film covers a smaller field of view, making everything within that smaller field appear larger by comparison.
If the dimensions are referring to the final display size, then option 1, the image will become smaller, applies. The question does not specify if this is about reducing the size of the film in a camera, or reducing the dimensions of a print from a larger image. If this is about reducing the size of a print from a larger image, the whole image will be scaled down and everything in it will be smaller. If we are discussing film in a camera, however, the field of view represented in the smaller film will be less. Neither option discusses distortion directly, hence the image will not necessarily be distorted; the proportions should remain consistent with proper technique.