The fact Man City have just put another 2 games into their schedule makes the choice easier so at this present moment in time we have to prioritize the PL.
In the PL it's a straight fight between us and City. In the CL after today "if" we overcome Bayern, we have another 7 teams to contend with of which we'd have to overcome another 5 games to succeed. Our recent history in Cup Comps also is something to be concerned about.
If we lose today all our focus will be on our last 8 PL games. City have 8 PL games, at least another 2 CL games (5 in total if they go all the way) and The FA Cup they have at least 1 more game (3 in total if they go all the way) = 16 games to our 8 games.
We can have a weeks rest between games, City will have to travel far more with little time to focus on their next game, which will approx' be 1 game every 3 days.
Don't get me wrong it's nice to look good on the greatest stage however we desperately need to become a force at home. City retaining the PL Title, I fear could leave a huge mental scar on us because this will be the 3rd time in 10 years we've thrown a great chance away at winning our 1st PL Title.