On April 13, 2003, about 1415 central daylight time, a Cessna 152, N757AZ, registered to and operated by Douglas Aviation, Inc., experienced an intentional loss of engine power and subsequent forced landing short of the runway while on approach to land at the Olive Branch Airport, Olive Branch, Mississippi. Visual meteorological conditions prevailed at the time and no flight plan was filed for the 14 CFR Part 91 instructional flight. The airplane was substantially damaged and the certified flight instructor (CFI) and student pilot were not injured. The flight originated about 1330, from the Olive Branch Airport. The CFI reported that after takeoff, the flight proceeded to the practice area where the student pilot performed airwork maneuvers. The flight returned to the departure airport for a planned full-stop landing, entering the traffic pattern for runway 18 on the downwind leg. When the flight was abeam the numbers for runway 18, the CFI positioned the fuel selector to the "off" position to simulate an engine failure as had been done to him as a student. The engine lost power about 5 seconds later after turning onto the base leg. The student pilot recognized the loss of engine power and went through the emergency procedures, to include moving the fuel selector to the "on" position. The engine continued to lose rpm and eventually quit after the fuel selector was positioned to the "on." The CFI confirmed the fuel selector was fully in the on position, took control of the airplane on the base leg, pitched to achieve best glide airspeed, and turned towards the runway. An emergency was declared on the UNICOM frequency and the CFI attempted to restart the engine while flying the airplane; engine restart was unsuccessful. The student helped secure the cockpit and the CFI recognized the airplane could not reach the runway. The airplane was landed on grass short of the runway with the main landing gear first, and he attempted to hold the nose landing gear off the ground. The nose landing gear collapsed after contacting uneven terrain; the CFI and student evacuated the airplane after it came to rest. The CFI further reported there was no mechanical malfunction or failure. Following recovery of the airplane, the engine was started and operated only to idle rpm; impact damage precluded operation at a higher rpm.