You are right, although I'm not sure if translated in English it actually has the same meaning it has in Italian. I think it is kind of idiomatic. It's actually a pretty common way to say something like "Look/Listen! He's laughing a lot!", but it can also have the literal meaning.
I see your point of view and the imperative is cool here, of course. My point is that I did this excercise during a training with time, so there was not enough time to think twice. I saw the possibility to use "You hear how he laughs" and I don't understand why this was marked wrong since my answer was absolutely correct and appropriate.