“Your microphone isn’t working” however your Speakers work.
So you get the dreaded Your microphone isn’t working Switch to a different device or try reconnecting this one.
But everything seems right. In fact you can hear your microphone working in your headset (or speakers). You try different headsets, speakers etc and you can’t fix it.
Make sure within Microphone privacy settings that you allow APPS to use the microphone.
Now I am assuming you have done all the rest of the usual stuff including:
CONFIRM THAT WINDOWS MICROPHONE IS ENABLED
RESTART MICROSOFT TEAMS
CONNECT AUDIO DEVICE BEFORE CALL
TRY A DIFFERENT AUDIO DEVICE
And if all else fails and I am not sure why you would have done this but REINSTALL MICROSOFT TEAMS