What should i answer on this form if i reside outside the united states?

There are two different drop-down lists, for different purposes, on two different pages. We can't see your screen. When you say "this page" we don't know what page you are looking at.

The first personal info page asks for your State of Residence. In that list, "Foreign or U.S. Possession is at the very bottom of the long list of all the states.

The mailing address page, shown in the screen shot that Critter-3 posted above, has a drop-down list at the top of the page for the type of address. That list has only four choices, one of which is "Foreign country."

You should select the appropriate entry in both lists. Selecting "Foreign country" on the mailing address page will allow you to enter your foreign address, without a U.S. state or Zip code.