The shortcomings of the conventional way of using and interpreting multiple-choice tests are summarized. Some theories and methodologies that can be applied for better use multiple-choice test items are described. Empirical facts are introduced to support the theoretical observations. New strategies are proposed that will reduce "noise" and lead to more efficient ability estimation. In so doing, simple-minded avoidance of non-monotonicity of the operating characteristic of the correct answer is reconsidered, and the efficient use of informative distractors is taken into account. This paper deals with nominal response and multiple-choice test situations in which examinees are required to choose one of the given alternatives in connection with the graded response model. The operating characteristic of a given response pattern is a product of the operating characteristics of the item response categories contained in that response pattern. The multiple-choice test situation should be treated as a special instance of the nominal level of response, although the problem of random or irrational choice should be investigated. Twenty-four graphs are included. (SLD)