A – Alveolar cavity through which the diffusion of oxygen to blood takes place. From blood, $CO_{2}$ goes to the alveolar cavity B – Blood transports $O_{2}$ and $CO_{2}$ from all over the body C – Capillary wall is the actual site through which the exchange of $O_{2}$ and $CO_{2}$ takes place. It lies close to the alveolar wall