yes - my smart car had an engine smaller than that (ok a smart car is not a sports car, but it did 88 MPH easily, and a sports car it bound to be more streamlined and lighter)
Power is inversely proportional to engine life, so if you are getting 200bhp from 500cc then the life of that engine is very limited. So have you 700cc runaround but don't expect many miles out of it.