Best with an example: there is a tag in the Physics Stack called "wavefunction".
Is there any one who actually works on "wavefunctions"? Questions related to wavefunctions are questions about the Schrodinger equation or quantum mechanics (both of which have their own tags already).
There are more examples like this one in the tags repertoire.
1) If one has enough reputation points, it is possible to directly propose tag synonyms. (Note in particular, that reputation points in the corresponding master tag are needed.) In OP's concrete example, one should go e.g. here or here.
2) Alternatively, if one doesn't have enough reputation points, there is a meta post called Tag synonyms for voting. There one can propose tag synonyms. In OP's concrete example, e.g.
wavefunctions -> schrodinger-equation
or e.g.
wavefunctions -> quantum-mechanics
Then users can vote the proposal up or down. If sufficiently many users upvote a proposal a moderator will create the new synonym.
are there too many and/or specific tags?
Generally, no, I don't think so.
To take this specific example, it doesn't matter whether anyone works on wavefunctions. That's not the criterion for what makes a proper tag. It's entirely plausible that someone might want to look through the questions we have about wavefunctions.
