You might look at the tiny roller skate that is the Scion iQ and assume it gets mega fuel economy. In short, it doesn't.
The iQ's wide stance and boxy shape mean it contends with frontal area (which creates drag) that's similar to that of most small cars, almost all of which are longer. And because of its small size, the iQ carries a stouter and therefore heavier structure relative to its overall size. Both of these conspire to return only decent fuel economy. The iQ is rated by the EPA at 37 mpg combined (36 mpg city, 37 mpg highway). Those numbers are well below what Toyota's range of thrifty hybrids return, with three of four Prius models at 50 mpg combined.
The ratings are also below the light five-door Mitsubishi Mirage's, which is pegged at 40 mpg combined. (In a short road test, we saw 43 mpg in a pre-production Mirage.) The Scion and Mitsubishi probably won't compete--the Scion has a base price $2,000 higher, for one thing, and it's more of a style statement--but it does underscore that ultimate smallness doesn't necessarily translate to big fuel efficiency in today's market.
The iQ does do marginally better than the aging Smart ForTwo, which has a combined rating of 36 mpg. And it offers a better driving experience, though that's not a very high bar. But part of its efficiency rating is due to a surprisingly low CVT final ratio, which pegs the engine at almost 4000 rpm at U.S. highway speeds. This is clearly a city car, and designed for temperate use to boot. During several tests comprised of the worst-case scenario--both highway miles and aggressive urban stop-and-go--we saw gas-mileage readouts of less than 30 mpg.
So while 37 mpg is better than most other gasoline cars, if saving fuel on the relative cheap is your aim you'll do better with a hybrid (and get more interior space as well). Or you can spend even less and end up with something efficient like the unstylish Mitsubishi Mirage. Its fuel-economy figures help to underline the iQ's position as a style statement rather than ultra-efficient transportation.