The whole first lesson in Greek is a mess. ε is demanded as an answer in one question, while έψιλον is demanded in another. Ditto with η and ητα, etc. In other words, you can't guess which answer is desired -- the Greek letter (ε) or the spelling of the letter (εψιλον), but only one will be accepted in many questions. It's an awful introduction to the course.
In Ancient Greek, ε was short and close [e] while η was long and open [ɛː].
The Romans likely heard both sounds as /e/ and wrote them down identically as they didn't have those separate sounds nor did they have letters for them, so both those letters came down to us as "e".
In Modern Greek, ε is a mid vowel [ɛ] and η has merged with several others into [i].
How can I understand the difference when voice says "έψιλον" and the answers have both "ε"and "έψιλον"? I chose "έψιλον" and the answer was wrong. Couple of lessons ago there were 2 same sounding word-letter epsilon, and one time correct answer was "ε"and the other "έψιλον". This confuses a bit.