Where to place setup.py file to make Flask project installable?

Question

I'm currently following tutorial on flask projects from palletprojects. I'm trying to understand what should be the location of setup.py file, as described on this link https://flask.palletsprojects.com/en/1.1.x/tutorial/install/

Summary of the code can be found on the following link

Installing Flask project can't open setup.py

Thanks in advance.