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It's not entirely true that you're always measured against your peers. Plenty of professors grade according to what they think deserves whatever grade. One professor I had gave no one a solid A because he didn't think anyone deserved it, and he failed half the class. Another gives half the class As even though his tests and stuff are really easy, because he wants to be nice and give as many As as possible.
For very large classes typically they more or less decide the grading beforehand.
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