This only applies in adaptive mode.
Ok, I only recently discovered this and I am not sure how many of my students figured it out but remained quiet about it. I only found out because an honest student brought it to my attention.
First Flaw: Question is 1 mark. Penalty set at 0.5. They get the question wrong the first time and they get 0.5 marks. If they try again and get it wrong, they get 0 marks. This means that the student is guaranteed at least 0.5 marks as long as they only guess/attempt once. I think that on the first wrong answer attempt, that they get 0 marks and if the attempt again and get it right, they get 0.5 back.
Second Flaw: This one is pretty major. Lets say I answer wrong, so as mentioned above, I get 0.5 marks (assuming question is 1 mark and penalty set at 0.5). I try again and get it wrong now I am down to 0 marks. I then go back and put my original first attempt wrong answer, it gives me back the 0.5 marks. I repeat this pattern as many times as I like until I find the right answer. I am guaranteed at least half credit and I can answer as many times as I like. Once I was informed of this issue, I went back and looked at some of the individual student responses and found that quite a few times a student got half credit for a question and answered it as many as 15 times by using the method I described above. It would be better I think to have an option to limit the number of attempts per question to stop this. I don't know about anyone else, but I don't look at every single individual student question and hand grade each one. If I wanted to do that, I wouldn't use Moodle at all to give quizzes/tests.