Learn German: Im Osten liegt die Stadt. - The city lies in the east.

Because the verb liegen (to lie / to be located) describes a fixed, stationary position, answering the question "where?" (wo?). Even though you are currently practicing using the accusative for movement (wohin?), two-way prepositions like in always drop back to the dative case when there is no change of location. Here, in + dem combines into the dative im.

Why is the verb "liegt" before the subject "die Stadt"?

This is the German "verb-second" (V2) rule in action! The sentence starts with the location Im Osten to emphasize it. Because that prepositional phrase takes up the first position, the verb liegt must take the strict second position. That pushes the subject die Stadt to the third position, right after the verb.

Is "Osten" plural here because it ends in "-en"?

No, it is singular. All the main compass directions in German are masculine and naturally end in -en: der Norden, der Süden, der Osten, and der Westen. The -en here is just part of the base word, not a plural ending or a special dative ending.

Could I just use "ist" (is) instead of "liegt" (lies)?