Q. How can I add a caption to an image in Word?

After you insert an image to your document...

Insert Caption

1. Right-click your image.
   1. If you want the text to wrap around the image, do that now. 
2. Select "Insert Caption..."
3. You may define a New Label so that it uses the abbreviation. (MLA typically abbreviated Figure to Fig. and Example to Ex.)
   
4. Write in your caption or citation in the Caption field.
   
5. Click OK.

Formatting the Caption

1. Highlight the caption and click the I to remove italics.
   

Change the Text Wrapping

In MLA, you can choose how to place images in your document, so long as everything stays inside the 1" margins. 

By default, the image will be added to its own line, rather than text wrapping around it. 

If you want the text to wrap around the image, change that first, then add the caption! The caption won't move with the image. Remember, MLA explicitly wants captions below the images. The caption is just treated as plain text by Word, so it's not an object we can add wrapping to itself.

1. Insert your image.
2. Resize if needed.
3. While the image is selected, use either the Layout Options button that will appear at the corner of the image or the Wrap Text menu at the top to view your options. (You can also right-click the image and select Wrap Text.)
   
4. Choose your wrapping -- probably Square or Tight. 
5. Proceed to follow the instructions to Insert Caption now.

Final result: