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A reference to the cardinal Qur'anic doctrine that "there shall be no coercion in matters of faith" ( 2:256 ), as well as to the oft-repeated statement that a prophet is no more than "a warner and a bearer of glad tidings", implying that his duty consists only in delivering the message entrusted to him. The plural "we" in this sentence relates to Noah and his followers.
Mercy here means prophethood.
Noah's answer (like that of the Prophet of Allah who spoke in later ages in Makkah and Madinah) is a pattern of humility, gentleness, firmness, persuasiveness, truth, and love for his own people. First, he meekly (not exultingly) informs them that he has got a Message from Allah. Secondly, he tells them that it is a Message of Mercy even in its warning, though in their arrogance the Mercy may be hidden from them. Thirdly, he tells them plainly that there can be no compulsion in Religion: but will they not accept with goodwill what is for their own benefit? He pleads with them as one of their own.