**Core Concept**
Alcoholic liver disease progresses through stages including fatty change, chronic hepatitis, and fibrosis, with steatosis and inflammation being common. Cholestatic hepatitis and granuloma formation are not typical features of alcohol-induced liver injury.

**Why the Correct Answer is Right**
In chronic alcoholism, the liver commonly shows fatty degeneration (steatosis) due to impaired fatty acid oxidation and increased lipogenesis. Chronic hepatitis results from ongoing oxidative stress and immune-mediated injury. Cholestatic hepatitis, involving bile duct obstruction and elevated bilirubin, is not a hallmark of alcoholic liver disease. Granuloma formation, which is typically seen in infections (e.g., tuberculosis) or sarcoidosis, is absent in alcoholic liver disease. Alcohol does not trigger granulomatous inflammation in the liver.

**Why Each Wrong Option is Incorrect**
Option A: Fatty degeneration is a classic feature of alcoholic liver disease due to lipid accumulation from impaired metabolism.
Option B: Chronic hepatitis is common in long-standing alcohol use, with ongoing inflammation and hepatocyte damage.
Option D: Cholestatic hepatitis may occur in alcoholic liver disease, especially in advanced stages, due to bile duct injury or secondary cholestasis, though it is less common than steatosis or hepatitis.

**Clinical Pearl / High-Yield Fact**
Remember: Alcohol causes steatosis and chronic hepatitis, but **granuloma formation is not seen** in alcoholic liver disease — it's a sign of infection or granulomatous disease, not alcohol toxicity.

✓ Correct Answer: C. Granuloma formation