error loading lib created with vue-cli

Creating a library using vue-cli works, but I'm having issues with an application displaying an image inside the library component:

How should I create/use this component so images are refrenced properly?

Steps to reproduce

git clone https://github.com/johnwebbcole/vue-cli-scoped-lib-issue.git
cd vue-cli-scoped-lib-issue
cd lib1
npm i
npm run build
cd ..
cd app1
npm i
npm run serve

I think the library is being built correctly, because the images are in dist/img.

How do I ensure the images referenced in the library component are found by web pack in the app using the library?