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If space is a consideration, you could also make a second step with a popup, or a second page. The first page consisting of a single Yes/No Choice, for example two buttons. If the user chooses No, he will get a second page with the checkboxes to choose Options. If you are at all concerned with people using touchscreens, this should be the best options, ...
Use either Responsive Disclosure or Responsive Enabling depending upon the standards in the format you're working in. Responsive Disclosure would mean first showing a radio button like this... download bmml source – Wireframes created with Balsamiq Mockups ...and then revealing the additional option in the whitespace if the user selects no, ...
I don't think either of these is the best option. Do you have to go with one drop down? I would prefer to see two. The first would display and the second would be hidden until the user selected either yes or no from the first. Once selected the second would display with the appropriate options.
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