Not sure if it would cause MPG to drop from the back wheels hopping. I guess if it was offering rolling resistance it could.
The cupping IS caused by wheel hop. It could be a number of things including worn struts, loose bushings or linkages, unbalanced or out of round tyres etc.
Best thing to do is start by checking the things most easily and cheaply accessable, like your tyre pressures, then linkages, then checK your bushes. All of which cost nothing to check.
Then wheel balance etc.
You should have found the problem by then.