When you create the listing, you need to put in the weight and measurements of the item you are selling with the bubblewrap or whatever you use for padding, but NOT the box size. Then you go over to your postage settings and set up all the box sizes you normally use if they aren't already there. Delete any box sizes you don't use. Etsy will then select the smallest box size the whole order will fit in. The box needs to be at least 1/2" larger than your item, or it will select the next larger box size.
You also need to set up in your Shipping Profile the classes of postage you offer. First Class has been defunct for a long time (except for letters) but if you use Calculated Shipping, they don't have a choice for Ground Advantage, which combined parcel post and first class. So you will need to select Parcel Post and/or First Class and Priority Mail as options. Parcel post (also defunct) usually doesn't collect quite enough for Ground Advantage (the new class) and First Class will automatically bump it up to Priority Mail if the item weighs a pound or more (when Ground Advantage allows up to 70 pounds.
Personally, I use the First Class, and refund when Etsy collects too much.
