I mostly agree with Lance. "Would" is the correct answer.. :D Just wanted to say that I think that Person B means:
"That would be a terrible *thing to do* if you were to do it."
Native English speakers often conflate the *idea* of doing something with actually doing it, and this is a great example of that. Clearly, there can't be anything very terrible about an idea. Person B means that what would be terrible would be putting the idea into practice (if Person A actually were to do so).
Person B is speaking in the subjunctive mood, is my analysis.
To answer your second question, either "bought tickets" (which is short for "bought some tickets") or "bought the tickets" would work well here. The second variant is more appropriate if you've just been talking about some specific tickets and you want to keep talking about "the tickets" you've just been talking about. The first, if you're talking about any old tickets, or if it's obvious which tickets you mean. In this case they both work fine. :)