Ironically the "shutting down" part isn't the real test because it's not a trick question: Discussing an interesting bug really is a great way to dive into technicals
and learn about the person's soft skills
and learn about their background amongst a bunch of other stuff.
But specific to the "shutting down because the requirements weren't 100% totally perfect" I see it all the time, and it's even what we're seeing people attribute to Google's slow decline
On one hand many hardcore engineers think we're seeing the slow and steady decline of software because of bootcamp kiddies ready to hack together any mess with a ball of Leftpad inspired libraries.
But on the other, so so many engineers struggle to see past the tip of their nose in larger organizations. There's this antagonistic co-existence with those outside of engineering where little effort is put into disseminating requirements if they don't agree with them to start.
Which ironically we're watching unfold here! People jumped to the conclusion the interviewer is in fact asking you to select from "every bug ever", but in doing so refuse to interpret that the interviewer might be asking "things you remember"... because that would be jumping to conclusions?
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For example: when estimating how long tasks take and finding that there's a disconnect between what the larger org expected and what an engineer produced, there's rarely any deep inclination of many otherwise brilliant engineers to find out why because it's assumed "non-engineers just don't know."
They might try to shave some time here or there, they might try and bake in some crunch time because they seem themselves as being that brilliant and dedicated that they can make it work.
But rarely will they try discarding the notion that there was a disconnect on the non-engineering side, and self-directedly throwing out their entire proposed solution to try something that fits on the assumption that their solution was what was wrong in the equation.
Because when they made the design: they designed it with all of their intelligence and skill and experience. And that's what they were hired for, to make brilliant things. So why should they cheapen all that? If that's what management wants they should go hire some junior devs or something.
And unfortunately, if the reality really is that majority of the business value could be produced with orders of magnitude less effort, it's the engineering side that has to enable that kind of discovery. The engineering side is source of the plays in the playbook.
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The reality is not every engineer can ever reach that. There are brilliant brilliant people who will never have the communication skills or the inclination, or the patience for any of this, and a good interview process doesn't require 1 person to ace every single signal.
Also some people will jump at me for implying engineers should need to zoom out, because in their minds management should be enabling them to stay complete heads down writing code.. but to me that mentality is not generally compatible with being a top of field company for the long haul.
Yes you might catch lightning in a bottle by just enabling very smart people to do build marvels in their silos, but business is more than having marvels to stare at.
I personally worked at a company that essentially succumbed to exactly this. A culture of exceptional engineering, hiring technically brilliant people at all costs... and dying a slow death because the engineers wouldn't leave room for business in their engineering.
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I guess the tl;dr of all this is: A CEO will say "It's no use if we take 10 years to make a perfect product, if our competitor makes it to market with a decent product next year". And engineers will expect as much from business types.
But what they often forget is that the same is true for customers. No one benefits from your engineering if it never reaches the field. No one benefits from your answer if you willingly get stuck on every single speed bump.
Being a good engineer is being able to efficiently categorize which speed bumps are "just" bumps, and which ones are chasms that will swallow the ship whole if you don't change direction.
If the engineers at Boeing had the mentality that I see often in our field, each 727 would have cost a billion dollars, and would no one would fly today.