@tblst
Well, to start, RL animal societies that follow the model the author propose for demons ( say, our close cousins the chimpazees ) have a very diferent view on that: powerful individuals in the top of the chain for sure flaunt their strength ( in fact in the end of their lives they end up faking they still have the strenght they had in olden days
![Stick out tongue :p :p](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
) , but the rest most of the times hide their strenght to not provoke the powerful ones into a fight ( especially potentially strong ones that still have to prove their mettle ... it is a better evolutionary strategy to do so than to risk to provoke a stronger foe in the top of the chain to beat you to a pulp just to show he still has it ). And as no one starts in the top of the chain, every individual ends up having atleast some experience in doing it. But let's concede that the demons are a anomaly just because ...
Then again, even if demons are that kind of anomaly where there is no subterfuge inside their society and everyone puts out frankly their power ( just saying it like this makes it look unlikely ), atleast humans do not live in that kind of society. And it is that, unlike you seem to imply, that humans are in average weak in mana ... sure, most of the humans might not be gifted ( and TBH we don't have a hint as if that is true or not ) , but we already seen 2 extremely powerful human mages ( the master and the discipule of Frieren ) and atleast Flamme was superior to any demon we crossed paths with already, so the actual human average mana might be signficantly high pulled by outliers like those.
And there is no way that some of those human mages would not end fighting eachother, since the human political world is hinted to be disunited, and given that the demons are not always invading, I would guess most human mages would end up figthing more human mages than demons in their lifetime and yet, while humans live in a society where hiding qualities is sometimes the best way of doing things ( unfortunately ), the only human mage we see even conceiving the possibility of hiding their power is Flamme ( note that the priest in this chapter never considers the possibility of Frieren not being outputing her full power in a situation that she didn't need to, so your 2) is shaky at best and the 1) is doubtful ) and it is just because she survived a demon raid and correctly deduced that demons were too frank on their power flaunting for their own good. That is ... fishy, to say the least.
About elves ... sure, we don't have much of intel on them besides Frieren being the best elf mage she knew in her long life, that there are not much of elves around anymore and that demons considered them to be a potential threat ... and that they were also not in the habit to hide their mana as well ( just see the previous chapter the reaction young(er) Frieren has to Flamme sugestion to not just go guns blazing and max displayed output to a mage fight ).
So, in resume, from all the races we see with mana usage ( still have to see a dwarven mage
![Wink ;) ;)](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
), all races seem to have the same aversion to hide their mana output besides some gifted individuals, that, probably not by acident, all belong to the same magician school . The author tries to explain it for demons with the argument above, that is ... well, not darwinianly optimal
![Wink ;) ;)](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
... but, even putting that aside , TBH there is no in manga explanation for the elves and human aversion to simply not flaunting power when it is not needed to do so when , atleast in the human society, the manga explicity states humans are not playing by the mana rules of demons and never exactly lauds the human honesty and forthcoming nature
![Wink ;) ;)](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
. In other words, either the explanation of this chapter is not coherent in-universe or there is something else in play that we were not informed so far.
P.S
My point with Aura knowing how to spot someone faking mana outputs apparently was not understood by you. If Aura did not learned it from fighting humans ( the humans that fought her were not strong enough to gain anything faking their power ) or elves ( because there are so few of them since Frieren was young(er) ), she had to learn from fighting demons ( most likely a decent number of them, because seeing the fluctuations in just one faker could simply be a unrelated fluke ) that were strong enough to actually gain something from limiting mana output against someone like Aura ( in other words, they had to have a comparable mana output to her ), something that flies straight against Flamme theory that demons can't ( or better said given her explanation, won't ) limit their power in a fight because their society hinges on hen fights to establish pecking orders ... if it is so paramount to curbstomp my fellow demons to establish my place in this society, there is literally no reason to hide my power against a comparable foe. And yet someone did ... and probably more than once.