If that's the case, many of the students in your post are right -- just giving them the degree could save them (and the school) a lot of time and money. Maybe your art history class is a cost-effective way to get a world class education in late Italian Romantic oil paintings, but as a way of proving you're smart enough to work in a law firm (or even "broaden your horizons and become a better citizen through rounded education") I can't imagine it's terribly efficient.
It's in every student's individual interests for their school's standards for admission and grading to be low, so they can obtain the credential easily.
But it's in the student body's _collective_ interests for the school's standards to be high, so the credential retains and improves its signalling value.
There's a reason a C- student at Harvard doesn't transfer to a deprived community college where they'd be at the top of every class :)
In my experience, exams are often full of ambiguous questions, questions testing knowledge that is not part of the course syllabus, etc.
If the grading was fair, I would agree with you, but it rarely is. And IMO this is what students really hate: they put in a hell of a lot of work. They actually get to grips with the material, and for stupid reasons out of their control they end up with no credit for it.
Many students are there not because they want to learn but because they want to get that piece of paper that is the ticket to a successful career. A teacher forcing them to learn, to spend time and effort studying and working, is not seen as a positive if your goal is simply to get a degree. The ideal teacher for them is someone who just give you an A no matter what. That would be the quickest and easiest way to guarantee achieving that goal.
This is the true issue here - the disconnect between what many students want from a university education and what that education is actually supposed to be.