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Drop-down lists in Microsoft Word are a way to restrict and control user input to predefined options. They are useful for surveys and data collection. To create a drop-down list, enable the Developer tab in the ribbon by customizing the Word options. Simply create, format, and modify the list by selecting the Developer tab, choosing the drop-down icon, and entering the options you want the user to select from. This feature allows users to easily select from a list of predefined options, making data collection more efficient and accurate.