There is a sweet spot with prop diameter that depends on all the relevant boat parameters: Length, weight, hull shape, engine hp, engine rpm, gear ratio, desired speed, etc, etc.
Too small a diameter, and to some extent too little blade area and the "slip" will be too high. Slip is defined as theoretical speed (pitch and prop rpm) compared to actual attained speed.
All props have some slip since they are churning in a fluid.
Too much diameter and the skin friction begins to eat shaft hp. This friction can result in a loss of speed greater than the gain from reduced slip. At some point a big dia prop just won't fit, or blades too close to hull (noise).
So somewhere between small diameter and large diameter is the right diameter.
Once diameter is selected, you pick pitch. Pitch is much like a gear ratio, you pick that to get engine rpm to the desired spot. Most boats that is to get a little above rated rpm at full power.
Oh, with all that said, there is a good bit of black magic involved!!