You can not eliminate all the wrong answers to pick the right one, because real-life problems don't have only three wrong answers. They have three thousand wrong answers. They can also have multiple correct answers. They can't be hacked by taking mock tests. Memorization does not help either, because they are unique, multivariate, and often multidimensional. They often require collaboration. You can ask for help as you go about them. You can utilize technology. You can try multiple times.
Educational testing prepares youth for problems that don't resemble real-world problems even from a distance. Therefore, colleges and employers that care about test scores are stupid. Instead, they should care about talent, which is what the market cares about. When was the last time you asked for test scores when you were buying a product?
Since consumers only care about product quality, which has to do with talent, the system should encourage talent, its expression, and its recognition.
Similarly, employers look for experience. Every tyrant can be said to be have leadership experience, but we wouldn't want any of them to lead us. Experience counts only if the task was hard and the individual did good. Since most jobs don't require anything demanding, which is why nepotism exists, the experience of having done them does not tell us much.
What's the alternative? TALENT. A portfolio is the most potent indication of talent. No one can say I can't design a website or I can't write. My work speaks for itself.
What should colleges and employers look for? TALENT. If they want the best talent, they should encourage applicants to send their works, ideas, or anything that shows their talent, from social media posts to fascinating ideas to a book they wrote in college to stories about unsurmountable challenges they faced in life.