@Cheryl741 you have a one bed one bath little tiny cottage (cute!) and a private room. 2 guests is the logical maximum in either space.
Capacity limits are not a suggestion, but just what I wrote a LIMIT. I would not charge extra for extra guests. I would say no extra guests, period.
Your house rules should state something about the size of your space and that extra guests are not permitted. Prior to check in (before the end of your refund period per your cancellation policy), I would message the guests and say "Just a reminder, we have a small space with maximum 2 guests, no exceptions. If your plans have changed and you need space for more people, l can send you instructions on canceling your stay with no penalty."
If you are going to allow additional guests, increase your capacity and list an additional charge per night per guest in your listing. But do one or the other. Not both. And don't let the guests dictate the terms. Its your space and your insurance liability.