I disagree with your marking of this question as incorrect, because one does NOT put the salutation 'Dear" onto an envelope. The question is not limited to the names section of the statement, but the answer is limited.
I consider my answer to the question as 'correct'
Question #: 1: Dear Mr John Smith, This is a correct on an envelope.
User's answer: False
Correct answer: True
Additional Notes: You can you both names on the envelope.