Generally, the questions asked are not black and white, and there is no wrong answer. Getting a good score means coming up with a logical answer, demonstrating your understanding of the issues, and defending your choice. Think "is it ok to steal a loaf of bread to feed a starving child" type questions. Having a well thought out answer saying yes is just as good as saying no. If you just said no because stealing is always wrong you will get a low score and if you say yes because stealing is ok if you really need it will give you a low score. Poorly defended answers will get low scores, but not flags. Flagged answers should be for troubling answers (like if you answered that it depended on the family's race or something). The point of the test is not to quiz you on what is the right answer, but to see that you can understand various perspectives of a conflict, and come to compromising solutions that take everyone's interest into account. ("stealing is wrong but it is understandable in a life or death situation to steal food to feed a starving child, however you should face responsibility for your actions, and society should take the circumstances into account when considering repercussions, society should have mechanisms where one doesn't have to steal to receive life saving food, perhaps the bread that is not sold at the end of the day could be provided to those who would not be able to afford it in the first place, ie a food bank, so that the baker does not lose sales and people don't go hungry")
Flagged answers get reviewed by higher-ups, but beyond that what happens is not disclosed to assessors. You still assign a flagged answer a score as normal. I imagine its the same for MMIs, where if someone says something really terrible, a note will be made, and after discussion with the committee you may or may not be disqualified from admission regardless of your overall MMI score.
