"The man sits down in the chair."
Translation:Mannen setter seg ned i stolen.
Yes, one can certainly sit in an armchair.
The distinction between sitting 'in/on' a chair in English translates directly to sitting 'i/på' a chair in Norwegian, depending on the type of chair. So if the English sentence uses 'in' then we're looking for 'i', and if it uses 'on' then 'på' is the correct translation.
"Setter seg" would mean "sets oneself". "Setter" being "to set" (not sit), and "seg" referring to the direct object of the verb. It is worded as "sits down" because "sets himself down" is the same thing but wordier. That is the literal translation, though. "Ned" is then "down". So the whole sentence literally translates to "The man sets himself down in/on the chair."
I am with a few others on this as I also put in Mannen sitter ned i stolen and in reviewing the hover hints, Duo does seem to suggest this could possibly be an option. So I guess it boils down to if one is doing the action of sitting down in the chair then Duos answer is correct but if it is the man is sitting in the chair then my answer is correct... Can be a bit of a trick question for the untrained mind!