**Core Concept**
The question is testing the understanding of the principle of diffusion in the lungs and the use of a specific gas to measure it. This concept is based on the physiology of gas exchange in the alveoli, where oxygen diffuses into the blood and carbon dioxide diffuses out.

**Why the Correct Answer is Right**
The correct gas used to measure diffusion in the lungs is Helium (He). Helium is used because its diffusion coefficient is high, making it an ideal gas to measure the rate of diffusion in the lungs. The principle of diffusion is based on Fick's law, which states that the rate of diffusion is directly proportional to the concentration gradient and the diffusion coefficient. In the lungs, the diffusion of helium is used to calculate the alveolar-capillary membrane conductance and the rate of gas exchange.

**Why Each Wrong Option is Incorrect**
* **Option A:** This option is incorrect because there is no gas commonly used to measure diffusion in the lungs that has a higher diffusion coefficient than helium.
* **Option B:** This option is incorrect because while nitrous oxide (N2O) is used in anesthesia, it is not used to measure diffusion in the lungs.
* **Option C:** This option is incorrect because carbon dioxide (CO2) is a product of cellular respiration and is not used to measure diffusion in the lungs.

**Clinical Pearl / High-Yield Fact**
A key point to remember is that the diffusion of helium in the lungs is affected by the surface area of the alveoli, the thickness of the alveolar-capillary membrane, and the concentration gradient of the gas. This principle is essential in understanding the pathophysiology of lung diseases such as chronic obstructive pulmonary disease (COPD) and pulmonary fibrosis.

**Correct Answer:** C. Helium