I am sure the whole point was to determine and demonstrate if he was really ready for an engine failure at 400ft. The answer added power was the wrong answer, since the instructor had to take over with the correct answer of put the nose down. I am sure that if the learner had responded correctly the CFI would have immediately restored power.
One of the main reasons our scenario was not good...no prior instruction or warning. We had never practiced or even talked about engine outs on takeoff at this point.
He was a fresh grad, new to the flight school, age 22, and I was his first 'start to finish' student...and I'm telling you, he put us in a somewhat dangerous situation unintentionally. As I said, he apologized. He knew.
We were practicing short field take offs, and climbing out at 60, per the procedure, so 4 things contributing at once. Slow speed, loss of power, pulling back on yoke (as instructed) and sink from taking out flaps.
It took about 1/2 second before we both comprehended that it was not a good situation. He said "whoa!" and pushed yoke forward. It caught him off guard how quickly we sank. I swear it felt like we were falling tail first.
We did practice engine outs on takeoff again...several of them. I always pushed the nose over, and left the throttle alone, as now instructed. But he never pulled it again while I was taking out flaps.
It might be something good to practice, (pulling throttle while raising flaps) but not as a total surprise for the first time to a student with no instruction at 400agl, in my opinion.
CFI's are human too, and make mistakes. I never got angry with him or held a grudge. I thanked him for his reaction, and he thanked me for mine, and we discussed it fully. Even laughed about it from time to time later on as I warned other students to smack his hand if he moved it toward the throttle.
The only thing I ever faulted him for, was he never taught me about incipient spin/stall. I learned about that on my own not long before my check ride, and felt it was important to a
new student. (I didn't become a learner until recently)
He was off to the airlines about 18 months later. I hope to get on a flight with him sometime. Maybe he'll let me up in the cockpit and I'll pull the power on his ass one time.
apologies to OP if this is too far off topic