10 And because of the intercession for all, all men come unto God; wherefore, they stand in the presence of him, to be judged of him according to the truth and holiness which is in him. Wherefore, the ends of the law which the Holy One hath given, unto the inflicting of the punishment which is affixed, which punishment that is affixed is in opposition to that of the happiness which is affixed, to answer the ends of the atonement—
11 For it must needs be, that there is an opposition in all things. If not so, my firstborn in the wilderness, righteousness could not be brought to pass, neither wickedness, neither holiness nor misery, neither good nor bad. Wherefore, all things must needs be a compound in one; wherefore, if it should be one body it must needs remain as dead, having no life neither death, nor corruption nor incorruption, happiness nor misery, neither sense nor insensibility.
12 Wherefore, it must needs have been created for a thing of naught; wherefore there would have been no purpose in the end of its creation. Wherefore, this thing must needs destroy the wisdom of God and his eternal purposes, and also the power, and the mercy, and the justice of God.
13 And if ye shall say there is no law, ye shall also say there is no sin. If ye shall say there is no sin, ye shall also say there is no righteousness. And if there be no righteousness there be no happiness. And if there be no righteousness nor happiness there be no punishment nor misery. And if these things are not there is no God. And if there is no God we are not, neither the earth; for there could have been no creation of things, neither to act nor to be acted upon; wherefore, all things must have vanished away.
When we are brought to God to be judged, He will not choose our punishment, because there is already a predetermined punishment attached to our poor choices. We have indirectly chosen the consequences by choosing our actions. If we have not taken advantage of the atonement, then God Himself can do nothing more for us at this point; because mercy cannot rob justice.
So why can't God just be merciful to penitent and impenitent alike? The next few verses answer this question by explaining that there must be an opposition in all things. This is a simple axiom of the universe, but one that is not inherently obvious to us. Consider this: what if took everything in the universe and made it one trillion times larger than it is right now, including ourselves? How would we describe things? Would we just throw the word "small" out of our vocabulary due to lack of "small" things? No, because things that seem small to us now, would still seem small to us then. In other words, nothing can be large, unless there is something smaller than it, and vice versa.
The above example may seem silly, but now apply it to eternal principles like wickedness and righteousness. If there were no such thing as wickedness, what would it mean to be righteous? If there were nothing bad, what would it mean for something to be good? If we didn't have opposites, then all things would be "a compound in one." In chemistry, a compound is a mixture of elements that are bonded together as one. Water is made up of hydrogen and oxygen atoms, but you wouldn't know that by looking at it; you don't see the hydrogen and oxygen because they have bonded together into a single compound. What is so bad about a compound then? Nothing, unless every atom in the universe joined together to form a single compound. Then there would be nothing to act on this universe-spanning compound, and nothing for it to act upon. It would just exist. It would serve no purpose, because it could do nothing.
The logic of verse 13 starts to make more sense in this light. If there is no law, then there is no possibility to sin. Without the possibility to sin, there is no righteousness. If you only have one choice, then you really don't have a choice at all. If the choice is made for you by default, then there is nothing laudable in making the choice. And how could anyone learn, progress, or find happiness if they don't have the ability to choose their own actions and reap the consequences?