5). Is US Defense contracting efficiently?

Northrop Grumman won a $55 billion contract to build the new long-range strike bomber. (It's big money! Let's hope it's done with efficiency)

A few years ago Northrop Grumman was chosen over Lockheed-Martin for the largest US Defense contract in over a decade with the purpose of building new long-range strike bombers. The new bombers will replace the aging B52 and B1 bombers of the past. Northrop is famous or infamous for having built the high price, giant size B2 Stealth Bombers in the past.

Given that this individual contract of $55 billion is larger than many countries' entire defense budgets, it seems important to consider whether this contract will prove to be efficient.

a). Think about and discuss whether US Defense Department contracting is efficient? What are some of the hurdles (potential market failures) that the defense department must overcome in achieving a degree of efficiency? Be sure to touch on monopoly, monopsony, and principal/agent issues

b). Discuss different reasons why weapons systems have the price they have as compared to typical private goods such as consumer electronics, cars, paper towels, etc. Be sure to think about market power in the context of the price.

*Be sure to discuss extra complications in this market as compared to you purchasing a consumer good from perhaps Amazon or Target, Best Buy, etc.