Assuming they are salaried not paid hourly, they seem to being doing the job asked at the agreed upon rate, not sure how it is fraud. That said, just because it might be legal doesn't mean it is ethical. Personally I'd tell the boss "I've gotten this task down to where I have some spare time, what else could I do" and try to get some more work to do.
Yup; and the company is making a bet that you produce more than you cost. Sometimes employees generate a lot more value than they cost; the company usually keeps most of the winnings there, and only gives you enough to stop you going somewhere else. That is, the competitive pressure on employee wages is much higher than the competitive forces within most companies that control whether they get to keep the windfalls from particularly efficient employees.
