Image upload size/resize question

So if I change max upload to 10 MB and max megapixel to 12, what happens when a user tries to upload a 16 megapixel image that’s 7 MB?

Under the default settings a significant percentage of pictures taken by newer phones are larger than 4096 kB, but nowhere near 40 megapixels.

I’m still not understanding what happens when, or why the defaults are set to what they are.

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