Alveoli
Alveoli is the exact place where the gas exchange takes place. The structure consists of air space, surfactant, and alveoli fluid wrapped around the pulmonary arteriole and valve, transporting oxygenated and deoxygenated blood inside and out of alveoli. Alveoli are described as a round shaped-pocket of air. Due to the presence of surfactant serving as a structural support layer, the alveoli do not collapse.
Figure 1. Illustration of an alveoli.