That's from Biggest Riddle Book in the World, by Joseph Rosenbloom. Published in 1976 by Sterling Publishing Company, the copy at Google Books shows that it was reprinted at least 11 times:
A quick search of the book, using "Indian" as the search term, shows this "joke" is in it, too:
Rosenbloom's book doesn't have illustrations for those two "jokes," so that's not the one in question.
And here's the image (adding it at 11:40 AM on March 17, with permission of the parent):
In American Indian Stereotypes in the World of Children: A Reader and Bibliography, there's a passage about that book:
Cerf’s More Riddles (1961) contains an image and verse that epitomize the detached nature of “Indian” imagery from the reality of Native people. “What has . . . Two legs like an Indian? Two eyes like an Indian? Two hands like an Indian? Looks just like an Indian? But is not an Indian?” The questions are accompanied by a headdressed, buckskinned, dancing caricatured “Indian.” The answer to the riddle, on the next page, is “A picture of an Indian,” and is illustrated with a child holding a picture of the same caricature. The “Indian” image in this and other books has no reality except as a white-created caricature of Native people, true only unto itself, and the answer to this riddle unwittingly reflects that fact.Cerf's book is old, but is popular, which is why it is still in that library. There are other joke and riddle books with that sort of "joke" in them. I noted Rosenbloom's book, above, but I recommend you get a copy of American Indian Stereotypes in the World of Children: A Reader and Bibliography. I've got a hard copy of the first edition (published in 1982), but get the second one, which came out in 1991 (I have a hard copy and electronic copy of that one). The publisher is Scarecrow Press, and the book is edited by Arlene Hirschfelder, Paulette Molin, and Yvonne Wakim. Inside are chapters by them, and other writers, too. Here's screen captures of the Table of Contents for part one (part two is the bibliography):
I think American Indian Stereotypes in the World of Children can be used as a collection development tool. As the Table of Contents shows, it has chapters about books, textbooks, toys, films, holidays... It is amongst the books I read early in graduate school, and that I use as a resource, now.
If the Native parent gives me permission to use the image she shared last night, I'll be back to insert it and the title of the book her child was reading. Obviously, these "jokes" aren't funny to those who are the subject of the joke.