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If the URL identifies a resource (REST-style) and that database entry doesn't exist, then yes, 404 is less confusing response. If the URL identifies an API endpoint (RPC-style) then, sure, tunnel the error inside a "I successfully failed to handle that request" response if you like.

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All URLs used when interacting with an API obviously identify API endpoints. There is no such thing as a URL which is part of an API but which is not an API endpoint.

There is a difference between /api/entity/123 and /api/search with a payload of 123, though.

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