No, "to lay" is transitive and requires an object. "To lie", as in "to be located" is intransitive and cannot have an object.
Spanish, Italian and French make this even more interesting when they translate находится as reflexive verbs: "to find oneself". Even English does this in the children's prayer that begins "Now I lay me down to sleep..." The translation would have to be either "Where does America lie" or "Where does America lay itself".
For me, reflexive verbs at semi-transitive, because the object of the verb is the subject, and there can't be a real direct object of a reflexive verb - but it's kind of not intransitive, either.
That's a lot of peripheral digression, but relevant to looking at how this verb works. It seems to be semi-transitive, in the way that "lie" can be in the phrase "I lie [myself] down".
The question that remains for me is whether находиться is ever completely transitive, as in "to lay [something] [somewhere]". My gut feeling is that it is not, and a different verb is required for that operation.
Also, some source materials I've read say that the ending -ся means the verb is reflexive, so it technically can't have an object - thus making "to lay" absolutely wrong - unless you're just talking to someone, then "lay/lie" are basically the same thing - wrongly so, but usage trumps grammar most of the time
While "situated" is a valid translation, it's not a very good choice of word, because it can refer to non-physical issues, like international policies. Even in a physical sense, "situated" requires reference to things around the main subject/object of the verb. "Located" is a much better word to use - it refers to actual physical location (whether on a map or elsewhere) and doesn't carry with it the nuances and connotations of non-physicality or references to other things, as "situated" does.
It may be that находиться can be used in a way which makes "situated" a better choice, but when talking about where some thing is, then "located" is a far better word to use.
Example: "America is situation between Canada and Mexico in the North American continent of the western hemisphere." "America is located there [pointing on a map].)
In other words, allowing "situated" when you actually mean "located" would be teaching non-native English-speakers poor English "diction" = "choice of word".
Duo may eventually allow it in this particular exercise, but I think that would be a mistake.
Америка appears to be in nominative case, which would be proper if the sentence were simply где Америка?
Находится doesn't change the case - Америка is not the object of the verb, but the subject, plus the verb is reflexive (-ся makes it so, I believe), so it can't have an object. In any event, for orientation as to case, I look at the sentence as stating "America is where?".