[Vuejs]-How can Vue js load image from /dist/ folder when it does not exist?

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So after some more googling, I found this turorial that explains the entire webpack-simple setup.

Here is the section regarding the /dist/ folder:

npm run build
Right now we are simply using npm run dev to work with and test out an
installation of the Vue Cli tool. This is great
for testing in the local environment, but what about if you actually
want to publish your application to the web? In this case you will
instead run npm run build. This will build your application for
production and you’ll see a new /dist/ folder which contains the
finished bundle.

So during development, the files are placed in a chached / temp location (not sure where)

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