Apple to Fix Resolution Issue With Ultrawide Displays on M1 Macs in Future macOS Update
In a new support document, Apple has acknowledged that when an ultrawide or super-ultrawide external display is connected to a Mac with the M1 chip, some resolutions supported by the display may not be available currently.
Apple says it is aware of this issue and has a solution planned for a future macOS update. Apple did not specify exactly when a fix will be available, but the first beta of macOS 11.2 was seeded last week, so that is one possibility.
To see additional resolutions for your external display, click on the Apple logo in the top-left corner of your Mac, open System Preferences, click Displays, and press and hold the Option key while you click "Scaled."
There is a running thread about this issue in the MacRumors forums.
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