Daniel notices that every year with a mild winter, his roses begin to bloom in February, but every year with a severe winter, his roses do not begin to bloom until April. He concludes that the severity of the winter is responsible for the month in which his roses begin to bloom. Daniel is
A. very probably correct in his conclusion that the severity of the winter is a cause of when his roses begin to bloom.
B. probably misguided in that there is no apparent correlation or causation in this situation.
C. definitely confusing correlation with causation.
D. likely correct that there is causation, but the causation is more likely running in the opposite direction in that the initial blooming of his roses is the cause of the severity of the previous winter.
Answer: A
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Suppose that Bill is a big movie buff and enjoys renting movies from the local video rental outlet
Assume that he is willing to pay $5 for the first movie he rents for the weekend but would only pay $4 for a second and still only $3 for a third movie. If the video rental franchise charges $3.50 per movie what will Bill's consumer surplus be and why? Assume now that the video rental franchise now has a new package deal in which it offers to rent three movies to customers at a price of $9.00 would Bill be interested? How much consumer surplus would he enjoy now? What is the maximum price that the video rental franchise could charge and still make Bill interested in the package deal?