You are forgetting that artists have to pay for equipment, eat, have a place to live, etc.

And then there is the cost of a renting out a studio, a good sound mixer, additional musicians to play parts that your main band may not be capable of, etc.

The cost of reproduction may be close to zero, but the cost of production is most certainly not dropping. Technology may allow some genres of music to be one man bands, but that is certainly not true for all music genres. Orchestras cost money.

I think we can discuss that problem when it actually becomes anything other than a fantasy. There are solutions to the "artists are literally starving" problem, but there is really no sense considering them while artists are still flying around in private jets.

Sure pop stars are, but there are hundreds of thousands of artists who aren't signed to big labels.

I really don't care one way or the other about any artist who plays on the radio. I want to ensure the artists I listen to are able to continue making music, therefore I buy their music.

Do you really think there are artists out there that would be paid a decent living wage, were it not for piracy?

The marginal cost of the second ticket to see my favorite film (Scarface, Al Pacino) is a few cents. The marginal cost of the first ticket is $25 million.

We could switch over to that system - it's not unprecedented, historically many rich people have been patrons of the arts and commissioned new works. You might find the art market shifts so it aims less at the man on the street and more at the millionaire in the boardroom. Whether that would be a good or a bad thing is a matter of opinion.

What do you think?

I think the existence of kickstarter shows that people, if asked to fund a work of art, will be willing to do so.

I think you should go back to college, or study free-market economics. Marginal cost of production: http://en.wikipedia.org/wiki/Marginal_cost

According to the page you linked to, in economics and finance marginal cost is the change in total cost that arises when the quantity produced changes by one unit.

When production of Scarface movie tickets increases from zero units to one unit the film has to be made, increasing the total costs from zero to $25,000,000.

Hence, the ∆Q is 1 unit and the ∆TC is $25,000,000 giving a marginal cost of ∆TC/∆Q = $25000000/1 = $25,000,000

Could you be more specific about why I need to go to college? Is there some error in my calculation?

There's an implicit assumption of "more than one unit" in a market. One of anything is a curiosity, not amenable to economic analysis. In this particular market, popular music, where the issue under discussion is massive copying, it's downright disingenuous to do the "sunk costs are marginal cost of the first unit" schtick. Marginal cost gets calculated without sunk costs.

It says right there in the link you provided that the marginal cost is the change in total cost that arises when the quantity produced changes by one unit.

We're discussing the mass entertainment market, where total costs are dominated by fixed costs. Do you seriously think it's disingenuous to take fixed costs into account? I'd say it's far more disingenuous to just ignore the bulk of your expenditure.