Look at the way she's peeking over the edge...shouldn't she be eating a nibble of the mushroom instead? The real story of that story is the amanita muscaria.
That’s the whole point; Alice has fallen down the rabbit hole and eaten a cake that has shrunk her to a height of just 3 inches. The Caterpillar smoking the hookah pipe shows Alice a mushroom that can restore her to her proper size. But one side of the mushroom stretches her neck, while another shrinks her torso, so she must eat exactly the right balance to regain her proper size and proportions.