I prefer my exams to contain essay questions, because they offer greater opportunity for expression; they're harder to copy without cheating being obvious; and they give me a better idea of just how much my students grasp the material. The down side is that they take forever to grade, so I can certainly understand the practical consideration of a multiple-choice exam -- especially since the professor is under time pressure to turn in final grades at the end of the course.
Brenda, another game-designer-turned-professor, says to me about multiple choice:
For a multiple choice exam, you can create the silliest answers, and people will select them. It's like a mini-game. My favorite silly answer is "Costikyans". I use it a lot. We talk about Greg's articles regularly in the quarter, and it still surprises me when someone selects his name as an answer. In this case, the correct answer should have been "Semiotics."
I'll have to try that some time, just for laughs.
And now that she mentions it, if I ever make an RPG, I'll be tempted to name the currency the Costikyan. It doesn't sound that much more odd than, say, Gil, Potch or Zenny. "A sword of flame? That'll be 300 Costikyans, please."