My 16 year-old daughter asked me if she was suppose to shave her entire vagina. How do I respond with her being 16 years old?

Ask her where she got that idea.

The wording she used is a great way to lead into discussion. I would tell her that it's not a matter of "suppose" to, but a matter of choice. I would also explain that if she were to do this it would be very itchy when it grows back, it would be a daily maintenance type thing, she'd be more prone to ingrown hairs, etc. etc.

Ask why she wants to do this, and why she thinks she's supposed to.