Kevin’s school offers a molecular biology elective during second semester, which is not an honors or AP course. Kevin would like to take the elective during the second semester of his junior year, in addition to his other coursework, but he knows that doing so would lower his GPA, so he decides not to.

In Kevin’s story, the class ranking system was poorly designed: it rewarded some students for achieving less rather than for achieving more. The colleges that Kevin applied to were relying on a faulty measure of quality.

Taking a non-honors or AP course only harms one's GPA (in this ranking system) if it replaces an honors or AP course. There have to be enough honors or AP courses offered to fill a student's entire schedule in order for this to be the case.

Ranking systems which do not weight honors or AP courses can also encourage students to achieve less. This can even happen when honors courses of different difficulties end up with the same weighting.

I think the real lesson to draw from such examples is that creating a measure by taking information which exists in a multidimensional space and projecting it into a single dimension can lead to perverse incentives. (A similar idea is mentioned in another comment in this thread, but I thought it worth pointing out the general principle.)