Je suis d'accord. The sentence should be written as "Le Canada est en l'Amérique du Nord" in my opinion.
We wouldn't say this in English ("America" by itself in English refers to the United States). But the French do, indeed, use "Amérique" to refer to one continent, which they then divide into the regions of North America, Central America, and South America.
See, for example, the French wikipedia entry for Amérique: "L’Amérique est un continent de l'hémisphère ouest de la Terre"
I wouldn't mind the Americas being referred to as one continent if they called Europe a part of the Eurasian continent (which they don't).
A better English translation for the French sentence would be "Canada is in the Americas". I don't know if Duolingo accepts that.
The English wikipedia entry for "Americas":
In Miami, with so many residents of Cuban descent, they make a big deal out of insisting that "America" is not synonymous with "the United States." When I lived there, I often saw references to "the Americas."
It is not common in the United States, but outside of it several people take "America" to refer to the entire western hemisphere.
The English statement by itself is inaccurate and somewhat offensive.
However, for our purposes, the issue is what do French people actually say? Can people with knowledge please join the discussion? Is M_M right in saying that the French combine North and South America into one supercontinent? How does this play out with them also referring to the U.S as l'Amerique?