Young 3 year olds squeeze the bulb (or press the button nowadays) regardless of the light color. They do this even if they can repeat back the instructions. When told "squeeze" or "don't squeeze" they can follow it. But when left to do it on their own, they need help. 4 year olds are better, especially if they're told to say "go" or "stop" for the different lights. But it's not until 5 that kids can reliably inhibit or not perseverate the actions.
My 3 year old is generally very compliant. But, there are moments that throw me. I have to remind myself that she is so young.