Translation:The actors performed in the auditorium.
I agree and it's a poor example in English as well the auditorium is where the audience sit. I have seen a few performances "in promenade" where the seating in the stalls was removed and the actors moved freely among the audience, and of course the chase through the audience is a staple of Panto. However, as far as the naming of parts in a foreign language is concerned this is a poor choice. I still don't understand why Duolingo insists on "артист" over "актер". "Актеры выступили на сцене. " would make everything a whole lot simpler without sacrificing any grammar lessson.