Do you know the context in which this is alleged to happen? If not, you are making quite a jump to conclusions.
There are circumstances where mode A is mandated, even if mode C equipped. Usually it will be in the AIP, or by ATC request, or because you have a duff encoder which is not all that unusual.
Clearly what you state above is true but it doesn't fit with...
What is the difference between ON & ALT as what I see on the C172 which I fly? Some instructors told me leave it at ON is sufficient, while others prefer ALT. Note that tower does not tell us whether to set transponder ON or ALT, but just gives the squawk code.
... which implies that the selection of ALT is down to the personal whim of the instructor!
Also, the fact that the original poster had not even had Mode A/C explained to them seems lax?
When I was training, one of the aircraft briefly had a faulty altitude encoder and we were told - for obvious reasons - not to select ALT in that aircraft. But the reason was explained and understood.
To just say 'ON is sufficient' without any kind of further explanation is deficient regardless of the other circumstances isn't it?