A contractor may be hired for a 10 minute job. If that job is just a walk across the street, it is easy money and the cost of doing business along with the amount of peripheral time (like scheduling and travel time) is very low. If that job is an hour's drive away, there is a 2 hour round trip to only get paid for 10 minutes of work. The cost of doing business far exceeds any money made (travel time, gasoline, insurance, vehicle maintenance, vehicle wear and tear).
This is why there is typically a 1 hour minimum with a higher first hour charge. This is also why travel time is sometimes included in the bill. A 2 hour round trip during the middle of the day may prevent that contractor from scheduling and working on any other job that day (as in there's only 1 billable job for that day with the rest of the day being unbillable). For this reason, enough must be charged per day to meet that contractor's daily living requirements to survive.
With more contract hours worked, the pay rate can go down because more money is being received thus meeting the contractor's survival needs. More hours with lowered pay also helps to not break the client's wallet and tends to encourage longer, more stable, more consistent work for the contractor. This is often desirable for both sides depending on the project.