sorry for the repost..Kindly delete it!!

Hi there,

Indeed you are right that its can refer to more than one noun. However! In the GMAT, ambiguity is a stylistic error and can at times be fine.

First you eliminate all the grammatical errors, then if you are left with an answer that is stylistically flawed (such as an ambiguity) it can still be correct. In this case, it is not a 'hard' ambiguity, meaning that it it more logical for the sentence to be considered unambiguous (somewhat) and therefore correct (even though there are two nouns to which its can refer). What I mean is that the placement of the its makes it more logical that the reference is to the region. Had the possessive been placed somewhere else the ambiguity would be more severe.

So your main hint here is to not immediately eliminate for ambiguity. First eliminate based on grammar. (at Master GMAT we do differentiate between the various mistake types and do not lump everything into 'grammar'!).

Your second sentence is a good example of a more obvious ambiguity and probably a better candidate for elimination as we really do not know what the pronoun refers to. But remember the rules above!