Am I being taken advantage of during the job application test?

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This Q&A is part of a weekly series of posts highlighting common questions encountered by technophiles and answered by users at Stack Exchange, a free, community-powered network of 100+ Q&A sites.

CodeWarrior asks:

I am looking for a job and have applied to a number of positions. One employer responded. I had a pretty lengthy phone interview (perhaps more than an hour) and they then set me up with a developer test. I was told that the test was estimated to take between six and eight hours and that, provided the results met with their approval, I would be paid for my work.