[gaius]

It sounds like the kind of applicant who understands the problem far better than the interviewer. So go on then: once you have detected it, what algorithm would you use to repair it? Wouldn’t you consider its existence to be a bug in the way the list was constructed?

[jimmaswell]

It depends too much on the context to give a general answer what to do with it. It can easily not even be an "error," like in the first example on this link where you're simply testing the strength of a PRNG. Another would be if you're writing something to represent reals in decimal and you want to see where your number loops, like 1/7 = 0.(142857).

Examples where it's not desired, and what to do: Detecting infinite redirects in browsers and stopping the loop. Detecting thread deadlock and terminating the process. Detecting looping references in an Excel spreadsheet and showing #ERROR in the cells instead of letting the process hang forever.