Actually the first image I see is a background image. To edit properties select section see the right side of the first screenshot.
In the next three screenshots start with the bottom one. Under background you will see "automobile… " .jpg
click on this and you will see editing tools as in the other two screen shots. Cover is good for desktop breakpoint but I recommend for tablet contain and x for tile.
I think if you adjust these settings for your background image you will obtain better results.
There is a forum discussion here
As for using other image formats you may need to add code. there is a css query to query browser support of newer images and code (Jen Simmons, Mozilla discussed this in a video a short time back). If doing this you must provide backup.