Lemmy is opensource, you can see and get a copy of the source code here. https://github.com/LemmyNet/lemmy There's no development cost because all developers are volunteers at this stage.

For each instance that depends on the admins running that individual instance. The instance I use is being sponsored by a NZ company that are providing the admin's a free virtual server to host on.

I have no idea. I'm sure we'll figure that out along the way. At first it will probably be out of pocket from thousands of homelab hobbiests.

Maybe eventually they could implement something like gilding that Reddit had. I'm sure gilding alone could fund a lot of servers. When you take out the millions of dollars the share holders were taking it properly didn't take much money to run all of Reddit.

Each instance is responsible for their own server costs. Many accept donations!

Yes, but that means it's going to split communities up between servers. So there won't be a mass exodus like reddit, just a handful of communities at a time (if needed).