Iron Dome rockets cost a lot more than the little unguided home-made RPGs that are coming from the other side.
I think any rocket capable of reaching Tel Aviv from Gaza is a little bit bigger than an RPG rocket. But, yes, you put your finger on the problem. Israel has limited numbers of interceptors and Hamas has lots of cheap rockets that they can fire in waves or as decoys.
I have to assume that Iron Dome works pretty much like Patriot III: The radar plots the incoming missile and if it’s determined that it won’t strike anything of value they don’t launch an interceptor.