Most lofty exam everybody entered (7)
I believe the answer is:
tallest
'most lofty' is the definition.
('tall' can be a synonym of 'lofty')
'exam everybody entered' is the wordplay.
'exam' becomes 'test' (synonyms).
'everybody' becomes 'all' (all people).
'entered' is an insertion indicator.
'test' going around 'all' is 'TALLEST'.
(Other definitions for tallest that I've seen before include "Sell tat (anag.)" , "Most incredible" , "Of greatest vertical extent" , "most unlikely" , "most implausible" .)