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B. Weiss, G. Gridling:
"Creating and Grading Multiple-Choice Exams";
Report for Research Report 63/2004, Technische Universität Wien, Institut für Technische Informatik, Treitlstraße 3, A-1040 Vienna, Austria; 2004.

Multiple-choice exams are a controversial matter, some people believe that they are not suitable for evaluating the knowledge of students. When setting up the mandatory course Microcontroller at the Vienna University of Technology, we decided to use multiple-choice (or, to be more precise, multiple-select) exams for our theory exams. In consequence, we needed exam questions and a grading system that were both fair to the students and measured their knowledge adequately. The following text summarizes our experiences with the development of good exam questions, lists possible grading schemes and discusses their advantages and disadvantages.

http://www.vmars.tuwien.ac.at/frame-papers.html