Wrong. The Ataris could display up to 128 colors in several graphics modes. Alternate reality was one of the games to utilize this feature, although I don't recall which graphics mode it was using.
The 8bit Atari had several early custom chips, and a ~1.8MHz 6502. Most of the same group also designed the Amiga, hence the custom chips for the Amiga, meanwhile the "new" Atari got the cheapasses from Commodore hence the cheap STs initially.
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