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Is the 'exit' flag given to a Tor node which only allows exit to a certain prefix?

Depents on the prefix size and allowed ports.

" "Exit" -- A router is called an 'Exit' iff it allows exits to at least two of the ports 80, 443, and 6667 and allows exits to at least one /8 address space. "

https://gitweb.torproject.org/torspec.git?a=blob_plain;hb=HEAD;f=dir-spec.tx...

https://lists.torproject.org/pipermail/tor-talk/2013-September/029992.html

If yes, what kind of effect does that have on path selection, will it only be chosen for exit'ing to that prefix and not be used as a relay?

"relays with the Exit flag are used mostly for exiting when they're scarce"

https://blog.torproject.org/blog/lifecycle-of-a-new-relay