Blocking the beam does not change the switch in the switch test.

An optical switch does not respond

Cause: Most often misalignment or dirt; otherwise a dead emitter, a missing +5 V, a failed receiver or a broken matrix wire.

Checks

• Look at the emitter: it should glow red. If not, measure +5 V at pin 2 of the transmitter board.
• On the receiver board (the one without the glowing LED), unplug the two-pin green/white connector and jumper its two wires together: the switch test should show the switch closed. If not, a matrix wire is broken.
• With the emitter covered, shine a flashlight into the receiver: if the switch changes state, the emitter and receiver are out of line.
• Pull both LEDs out and hold them close together; if the switch now works, the problem is alignment or dirt.

Fix

• Clean the lenses and re-align emitter and receiver.
• Restore +5 V or repair the wiring if those checks failed.

Systems

• Data East/Sega CPU Version 3b

Related tips

• Cleaning optical switches
• Which Sega games use optical switches

Source: Repairing DataEast 1987 (Laser War) to Sega 1995 (Batman Forever), Part Three, Clay Harrell (pinrepair.com)