Step 1: Recall the function of squamous epithelium.
Squamous epithelium is made up of thin, flat cells and is specially adapted for:
diffusion,
filtration,
exchange of gases.
Step 2: Examine each option.
Kidney: Tubules are lined by cuboidal epithelium.
Pancreatic duct: Lined mainly by cuboidal/columnar epithelium.
Lung alveoli: Lined by simple squamous epithelium to allow rapid diffusion of \(O_2\) and \(CO_2\).
Heart: Inner lining (endocardium) is specialized endothelium, not generally cited in this context.
Step 3: Identify the correct structure.
Since gas exchange requires a very thin lining, squamous epithelium is characteristically found in lung alveoli.
Hence, the correct answer is
\[
\boxed{\text{Lung alveoli}}
\]