Translation:There is an expensive restaurant on this street.
If you mean the issue of (fí) and (on the street), well: Fí does indeed translate as (in) - but typically when you translate things from one language to another, you wouldn't use word-to-word translation. It is typical in English to say (on the street) rather than (in the street) because typically (in the mentality of that language) things happen on the surface of the street and not INTO its surface. Same thing in English, you might live ON an island.
In Arabic, though, the considerations might be different to the usage of certain prepositions. Because (street) in the sentence above is treated as a "locality" (i.e. a place contained by something, and the restaurant exists within that place), hence the preposition in use here is (fí) meaning (in). If I use a word-to-word translation, and translate (on the street) على الشارع (3alá al-šári3) to describe the location of something, the Arabic listener would understand this to be on the surface of the street (the asphalt) and not the "place" of the street.
Yeah I guess it is one of these things that come in time. I myself still struggling with Russian (в) and (на) and their multiple uses. It has more to do with open and closed spaces, and changes with motion verbs like in German, yet some places just by convention take a specific preposition rather than the other. It's a brain mess for me here. Anyway, good luck with the shows!
I don't work with Duolingo but this is absolutely a grave mistake. Because we don't write it or type it down in normal text in Arabic. This short alif above is just a pronunciation guide and it is found in Quran a lot because Quran's orthography is special and different from the standard of modern Arabic. So such short stroke is used to note that there is a long vowel not written. Duolingo should accept the answer without it.
away from Duolingo's answer, I think your answer misses (there): in this street, there is an expensive restaurant - using (there) is required in English to point to the existence of something.
Anyway, I wouldn't be surprised that even the sentence I typed above would be considered wrong by Duolingo. Because contributors don't feed the system with all the possible combinations for a sentence.