Question: Describe a real situation where external costs (negative production or consumption externalities) are observed. Show graphically that when external costs are involved, market outputs tend to be too high, and market prices too low, relative to socially efficient levels. What is the associated effect on the incentive for individuals to engage in activities that created negative externalities?

I set up a real world problem below:

My real world situation is: there is a dairy farm that does not have controls in place for the disposal of water contaminated with cow feces and other pollutants. The water is currently dumped back into the nearby stream. This water is traveling to the downstream neighbors property, where it is causing damage to that neighbors vegetable crop when used. The external cost here is the cost of downstream neighbor having to clean water before use or losing crops.

I am not sure if this is a good real world situation to use. Could you please help me in understanding if I have grasped this concept in my real world situation example, and how I would make a graph to illustrate this.