Step 1: State the formula for the efficiency of a Carnot engine.
The efficiency, $\eta$, of a Carnot engine is determined by the temperatures of the hot ($T_H$) and cold ($T_L$) reservoirs.
\[
\eta = 1 - \frac{T_L}{T_H}.
\]
Step 2: Use the equation for an adiabatic process to find the temperature ratio.
The adiabatic expansion occurs between the hot reservoir temperature $T_H$ and the cold reservoir temperature $T_L$.
For an adiabatic process, the relationship between temperature and volume is $TV^{\gamma-1} = \text{constant}$.
Let the initial volume be $V_i$ (at temperature $T_H$) and the final volume be $V_f$ (at temperature $T_L$).
\[
T_H V_i^{\gamma-1} = T_L V_f^{\gamma-1}.
\]
\[
\frac{T_L}{T_H} = \left(\frac{V_i}{V_f}\right)^{\gamma-1}.
\]
Step 3: Determine the value of $\gamma$ for a diatomic gas.
For a diatomic gas, the ratio of specific heats is $\gamma = \frac{C_p}{C_v} = \frac{7}{5}$.
Therefore, $\gamma-1 = \frac{7}{5} - 1 = \frac{2}{5}$.
Step 4: Calculate the temperature ratio.
We are given that the volume becomes 32 times its initial volume, so $V_f = 32V_i$.
\[
\frac{T_L}{T_H} = \left(\frac{V_i}{32V_i}\right)^{2/5} = \left(\frac{1}{32}\right)^{2/5}.
\]
Since $32 = 2^5$, we have $\frac{1}{32} = \left(\frac{1}{2}\right)^5$.
\[
\frac{T_L}{T_H} = \left( \left(\frac{1}{2}\right)^5 \right)^{2/5} = \left(\frac{1}{2}\right)^2 = \frac{1}{4}.
\]
Step 5: Calculate the efficiency.
\[
\eta = 1 - \frac{T_L}{T_H} = 1 - \frac{1}{4} = \frac{3}{4}.
\]
In percentage terms, the efficiency is $75%$.