Everyone in Wonderland is either sane or mad. A sane person believes a statement if and only if it is true. A mad person believes a statement if and only if it is false.
One day, the Mad Hatter, the March Hare, and the Dormouse had tea. The three were good friends, and all knew whether each of the three were mad or sane (although who knows if they really believed it).
The Mad Hatter said, "I believe that the March Hare and Dormouse are both mad."
The March Hare replied, "I believe that the Dormouse believes the Mad Hatter is sane."
The Dormouse finished, "I believe that the Mad Hatter is sane."
Exactly which of the three are mad?
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Since March Hare believes that dormouse believes that Mad Hatter is sane, and Dormouse affirms it, then march Hare is sane. Then Mad Hatter cannot be sane, as he believes March Hare is mad, however, March Hare is not. Therefore, Dormouse is mad, since he believes that Mad Hatter is sane, but he is not.