The correct answer is: alveoli
Respiratory system or respiratory tract is divided into upper and lower tract. Upper respiratory tract includes nose and its cavities, sinuses, pharynx and the part of the larynx. Lower respiratory tract consists of the trachea, bronchi, bronchioles and the alveoli.
Alveoli are the ends of the respiratory tract the smallest units in it. Alveoli are small folded air sacs that are branching off from alveolar ducts and providing an extremely large surface area for the gas exchange. Gas exchange occurs thanks to small blood vessels – capillaries that surround alveoli and it occurs via the process of diffusion.