"Muito bem" and "Well done"? It's cause we use "Muito bem" in the same situations we would say "well done". Like a teacher teaching a student how to read, and he does it well, she says to him "Muito bem!" (Well done!).
I can't think of any other situation I'd use "Muito bem" other than this one. But I'm Brazilian, maybe in Portugal it's different, idk.
ps.: Ok I thought of one. If someone asks me how am I doing, I can answer "muito bem" (very good). That's probably what duolingo had in mind.
You pronounce "bem" sort of like beng, instead of making the m sound at the end, right?
...well, kinda. It is more like "bay" with a nasalized vowel sound on the "ay." But, that's right, the «m» is not pronounced.