Hey May, I don't think the overlap of the shadow and the border is intended, can you confirm?

Shadow and border of?

The grey (thick) shadow at the bottom of the dropdown (see screenshot in first post) overlaps with the (thin) border that goes around the dropdown on all 4 sides. To me it looks like the shadow should be moved down or up to avoid overlapping with the border (or the bottom border removed).

Gotcha. The shadow of the box should be #000 at 10% opacity. Inner shadow #DDD.

Color swatches

This question isn't about colors, though, but about the alignment/positioning of the shadow relative to the border. Right now the "inner shadow" is neither "inner" nor "outer" because it extends across the thin line around the box, so it's both inside and outside the box. From the image you posted (and your use of the word "inner") it seems like you want it to be on the inside, but in that picture the shadow also overlaps with the line and goes beyond it a little bit.

This is what we intended to have:

Inner shadow should be 3px
Box outline 1px
(Bottom) Outer shadow 1px

Change 184194 had a related patch set uploaded (by Bartosz Dziewoński):
MediaWiki Theme: Adjust toolbar popups' border and shadows

https://gerrit.wikimedia.org/r/184194

Patch-For-Review

Change 184194 merged by jenkins-bot:
MediaWiki Theme: Adjust toolbar popups' border and shadows

https://gerrit.wikimedia.org/r/184194

Verified in betalabs on Chrome, Safari - shadow does not overlap the border; the corners are rounded.