Learn Italian: Chi abita in questo paese?

When chi (who) is the subject of the question, we treat it like "he" or "she" and use the third-person singular form of the verb. That is why we use abita (he/she lives) rather than abiti (you live) or abitano (they live).

I thought "paese" meant "country". Can it also mean "town"?

Yes! Paese is a very flexible word. Depending on the context, it can mean a whole nation (a country), a small town, or a village. Here, "this town" or "this village" makes the most sense.

Why is it "questo" (this) and not "questa"? Doesn't "paese" end in an "e"?

Nouns ending in -e in Italian can be either masculine or feminine. Paese is a masculine noun, so it must be paired with the masculine form of "this", which is questo.

Why do we use the preposition "in" here instead of "a"?

While Italian usually uses a before specific city names (like a Roma), it uses in with the general word paese. So we say in questo paese (in this town or country).

Where is the stress when pronouncing "abita"?