You need to add 2 css rules to achieve your goal.

1 - flex-wrap: wrap; to dropdown for enabling wrapping

2 - flex: 1 0 1px; to mat-chip-listbox for making chips one under the other while all toggle stay in right

In conclusion

.dropdown {
    padding-top: 5px;
    flex-grow: 1;
    display: flex;
    align-items: center;
    justify-content: space-between;
    flex-wrap: wrap;
}

.dropdown mat-chip-listbox { flex: 1 0 1px; }